From bean to cup - Consumers International

From bean to cup:how consumer choice impactsupon coffee producers andthe environment

From bean to cup: how consumer choice impacts on coffee producers and the environmentISBN – 1-902391-63-2

Published by Consumers International in December 2005© Consumers International and IIED, December 2005

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Consumers International is an internationalfederation of 234 consumer organisations and agenciesin 113 countries worldwide.

Through its members and their supporters, ConsumersInternational directly represents tens of millions ofconsumers across the globe and speaks for consumerseverywhere, especially the most disadvantaged.

The International Institute for Environment andDevelopment (IIED) is an independent, non-profitresearch institute working in the field of sustainabledevelopment which aims to provide expertise andleadership in researching and achieving sustainabledevelopment at local, national, regional, and globallevels.

In alliance with others, IIED seeks to help shape afuture that ends global poverty and delivers andsustains efficient and equitable management of theworld’s natural resources.

This research was carried out under the auspices ofIIED’s Sustainable Markets Group, which aims toensure that markets contribute to positive social,environmental and economic outcomes. For furtherinformation see page 60 or:www.iied.org/SM/index.html

Copies of From bean to cup: how consumer choice impactson coffee producers and the environment can bedownloaded free-of-charge from the CI website at:www.consumersinternational.org/coffeeand from the IIED website at:www.iied.org/SM/index.html

This publication may be reproduced in whole or inpart in any form for educational or non-profitpurposes, with prior permission in writing from thecopyright holders. Consumers International and IIEDkindly request that acknowledgement of the source ismade, as well as to receive a copy of any publicationthat uses this report as a source.

From bean to cup:how consumer choice impacts

upon coffee producers and the environment

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Acknowledgements

This report is published by Consumers International(CI) as part of its Global Food and Nutrition Programmewith financial support from the Ministry of ForeignAffairs of the Netherlands. CI collaborated on thereport with the International Institute onEnvironment and Development (IIED). IIED’sparticipation in the project was co-funded by theSwedish International Development CooperationAgency (SIDA) and the Royal Danish Ministry ofForeign Affairs (Danida).

Consumers International and IIED would like tothank CI member organisations from the countrieswho took part in this project – in particular thepolicy officers, journalists, researchers andconsultants who conducted research in their owncountries and contributed to this report. Theseindividuals and organisations are:

Brazil Instituto Brasileiro de Defesa do Consumidor(IDEC) – Lisa Gunn

Denmark Forbrugerrådet /Taenk (The DanishConsumer Council) – Torsten Raagaard

Finland Kuluttajat-Konsumenterna ry – JohannaParikka Altenstedt

Portugal Associação Portuguesa para a Defesa doConsumidor (DECO) – Maria de Fátima Ferreira

United States Consumers Union – Kristi Wiedemann

Vietnam Vietnam Standard and ConsumersAssociation (VINASTAS) – Do Gia Phan

The following organisations conducted the fieldsurveys in Brazil and Vietnam:

Brazil – Centro de Café Alcides Carvalho, InstitutoAgronômico, Secretaria de Agricultura eAbastecimento do Estado de São Paulo, São PauloResearch team – Ms Flávia Maria de Mello Bliska, MrGerson Silva Giomo, Mr Júlio de Mesquita Filho andMr Sergio Parreiras Pereira

Vietnam – Vietnam Coffee and Cocoa Association(VICOFA), Hanoi Research team – Mr Doan TrieuNhan, Ms Dao Thi Mui, Mr Le Dinh Son and Mr LeQuang Minh

The project team would like to thank all the peoplewho were interviewed or responded to specificquestions. We are also grateful to Marlies Lensink, Bart Slob, Veronica Perez Sueiro, David King,Isabelle Mamaty and Joseph Nkandu who providedinsights based on their expertise on the coffee sectorand to James MacGregor and Annie Dufey who gavefeedback on drafts of this report.

International Institute for Environment andDevelopment Principal author and research manager: Maryanne

Grieg-Gran Research adviser: Bill Vorley

Consumers InternationalProject leader: Bjarne PedersenProject manager: Irina DanadaProject assistant: Marco PresuttoDocumentary producer: Luke UpchurchEditor: Kaye Stearman Design and production: Steve Paveley

From bean to cup

Contents

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Contents

Brief explanation of terms 4

Foreword 5

Executive summary 6

Chapter 1 – Introduction 11

Chapter 2 – Coffee and sustainable development 14

Chapter 3 – Sustainable coffee certification 21

Chapter 4 – Impacts of certification on coffee growing areas 31

Chapter 5 – Markets for certified coffee 39

Chapter 6 – Linking up producers and consumers 46

Case study 1 – Fair trade co-operative – small family farms 47

Case study 2 – The medium-size organic farm 49

Case study 3 – The large Utz Kapeh and Rainforest Alliance certified estate 50

Chapter 7 – Conclusions and recommendations 52

References 56

Annex 1 – Participating organisations 60

Accreditation body – Procedure by which anauthoritative body gives formal recognition that a bodyor person is competent to carry out specific tasks.

Certification – Procedure by which a third party giveswritten assurance that a product, process or serviceconforms to specified requirements.

Certification body – Body that conducts certificationconformity. A certification body may operate its owntesting and inspection activities or oversee theseactivities carried out by others on its behalf.

Certification system – System that has its own rules ofprocedure and management for carrying outcertification of conformity. Certification systems mayoperate at national, regional or international level. Thecentral body that conducts and administers a certifi-cation system may decentralise its activities and rights.

Certification scheme – Certification system as relatedto specified products, processes or services to whichthe same particular standards and rules, and the sameprocedures, apply. In some countries the same conceptis covered by the term ‘certification program/programme’.

Fairtrade – The term is used in the labelling system ofFairtrade Labelling Organizations International (FLO).The FAIRTRADE Mark is the Registered Trademark.Therefore ‘Fairtrade products’ specifically refers toproducts that carry the FAIRTRADE Mark.

Fair trade – Refers in broad terms to fairness intrading and does not imply a certification process.

International Coffee Organization (ICO) – The mainintergovernmental organisation for coffee, bringingtogether producing and consuming countries to tacklethe challenges facing the world coffee sector throughinternational co-operation. Established in 1963 underthe UN auspices, to date it has administered sixInternational Coffee Agreements (ICAs) and iscurrently negotiating a new agreement. For furtherinformation see: www.ico.org

Max Haavelar – Max Havelaar is not a brand but atrademark for fair trade. Products with the MaxHavelaar trademark follow the guidelines laid down bythe Max Havelaar Foundation, which owns thetrademark. The Foundation does not sell products butchecks the licence holders (producers or importers ofcoffee, chocolate, tea etc) who trade with farmers, co-operatives and plantations registered with MaxHavelaar. Established in the Netherlands in 1988, Max Havelaar is now active in 16 countries and is co-ordinated by FLO International in Bonn Germany.

Organic – Organic is a term defined by law in manycountries. In the US and the European Union (EU),regulations control the standards of production,accreditation, overseeing of certification and labelling oforganically produced foods and drinks, as well ascertification by third party verification and inspectionsystems. For example, the EU regulations on organicproduction stipulate the following standards:• cultivation of legumes, green manures, or deep-

rooting plants in an appropriate multi-annualrotation programme

• incorporation in the soil of organic material,organic livestock manure and vermicompost

• pests, diseases and weeds to be controlled by usingappropriate varieties, rotation programmes,biological pest control, mechanical practices andflame weeding

• seeds and propagation material organicallyproduced

• use of non-organic fertilisers, pesticides andbiological pest control methods is limited.

Standards body – Standardising body recognised atnational, regional or international level that has as aprincipal function, by virtue of its statutes, thepreparation, approval or adoption of standards that aremade available to the public.

Third party – Person or body that is recognised asbeing independent of the parties involved, as concernsthe issue in question.

1 kilo (kg) = 2.2lbs: 1lb (pound) = 450grams (0.45 kilo)

Brief explanation of terms

From bean to cup

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Foreword

Foreword

Efforts to reduce poverty have been hampered bydeclining and volatile commodity prices and theenvironmental impacts of industrial agriculture.There is an urgent need to make commodity marketswork in fairer and more sustainable ways. Coffee,with its high smallholder involvement andincreasingly variable prices, typifies the problems.The collapse of the International Coffee Agreement in1989 and the devastating impact of the slump incoffee prices on communities have been well-documented by researchers.

Certification is often advocated as one solution toproblems caused by volatile commodity markets.Coffee, as the first Fairtrade labelled product, is animportant test of the viability of certification. Intheory, certification should enable consumers to usetheir purchasing power to support sustainableproducts and so drive social and environmentalimprovements along the commodity chain.

However, certification faces several problems. It istypically associated with niche markets, a low profilewith retailers and the public, and limited prospectsfor market expansion. Certification may also becomeanother requirement for market access and a barrierfor small producers rather than an opportunity.

Not enough is known about the effects of certificationof coffee even though schemes are relatively well-established. Research into certification schemes havestudied small initiatives and have bypassed thelargest producing countries. This report focuses onBrazil and Vietnam, the world’s two largest coffeeproducers, and the major coffee consumer markets ofDenmark, Finland, Portugal and the USA. Itdescribes the main certification schemes, their uniquecharacteristics and their impact on growers, tradersand retailers.

But the main focus is on the impact of consumerchoice. When a consumer chooses to buy certifiedcoffee what effects ripple along the commodity chain,from retailer to grower? What are the factors thatprompt consumers to buy certified coffee – andequally, what are factors that keep them from such apurchase? Is it the price differential, or is it otherfactors, such as lack of information, low visibility, orunfamiliar packaging or taste? The report also raisesthe issue of the entry of big roasting companies intoexisting certification schemes.

This report, produced in collaboration by ConsumersInternational (CI) and the International Institute forEnvironment and Development (IIED), is acontribution to that debate and concludes with recommendations for stakeholders in the coffeecommodity chain. CI has produced a shortdocumentary to accompany this report. Just coffeewas filmed in Brazil, Denmark and London and isavailable on DVD (see page 10 for more details).

This report is timely, coming as the InternationalCoffee Organization is giving greater consideration toissues of sustainability and is reviewing the future ofthe International Coffee Agreement. While the reportfocuses on the role of consumer choice and thepriorities for consumer organisations, it recognisesthat if certification is to realise its potential it requiresaction from a range of stakeholders. We urge thesestakeholders – governments, donor agencies,certification organisations, roasters and retailers – totake forward the recommendations in this report.

Richard LloydDirector General Consumers International

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Camilla ToulminDirector International Institute for Environment andDevelopment

From bean to cup

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Background

Coffee is one of the world’s largest tradedcommodities, produced in more than 60 developingcountries, and consumed mainly in developedcountries with over US$70 billion of retail sales eachyear.1 At least 14 countries depend on coffee for 10%or more of their export earnings. It is estimated thatcoffee growing provides a livelihood for 25 millionpeople and that in total 100 million people areinvolved in the sector from agriculture through toprocessing and sale.

Between 1997 and 2001 coffee prices fell by 70% innominal terms and to below the costs of productionin many producing countries2 with drasticimplications for rural livelihoods. The slump inworld coffee prices in 2000-03 led many organisationsto focus attention on the adverse impacts on coffeeproducers. Prices have since improved but are stillrelatively low and very variable.

Over the last few years a number of certificationschemes for coffee have come to prominence,building on established organic certification schemes.Much hope has been pinned on these emergingsustainable coffee initiatives. But consumers are nowfacing a growing complexity of ethical andenvironmental claims in coffee and there is concernabout confusion and declining standards. It is alsopossible that certification may be anotherrequirement for market access and a barrier for smallproducers.

One important factor is the response of the consumerto the presence of certified coffee of different types onretailers’ shelves. How consumers respond dependson a number of factors related to their income,aspirations and ethics, as well as the real impact ofcertification on the producers and how this isconveyed to consumers.

Consumers International and several of its memberorganisations in coffee producer and consumercountries have teamed up with the InternationalInstitute for Environment and Development (IIED) toexamine the impact of certification along the coffeecommodity chain from producer to consumer and toconsider how to expand the market for certifiedcoffee. This report is targeted primarily atstakeholders who can influence consumptionpatterns in developed countries, as this is where thedemand for certified coffee is likely to grow – at leastfor the near future.

Research on coffee production was carried out inBrazil and Vietnam, the two largest producers ofcoffee. Research on coffee consumption was carriedout in Denmark, Finland, Portugal and the US. Thechoice of countries reflects their importance as coffeeproducers and consumers, and the interest shown byconsumer organisations in those countries in thetopic of sustainable consumption.

The coffee commodity chain

The report starts by giving a background to the coffeecommodity chain and the economic, social andenvironmental issues associated with it. Coffee goesthrough stages from the grower to the final retailoutlet: preliminary processing, milling, export,import, roasting, wholesale and retail. The nature ofthis commodity chain and the relationships betweenplayers at different stages and between stages havechanged over the last 15 years, influenced inparticular by the collapse of the International CoffeeAgreement (ICA) in 1989. Many state-controlledmarketing boards have been replaced by privatetraders, and there has been increasing concentrationin trading, roasting and retailing. New low-costproducers have come on to the market, leading todownward pressure on prices.

Executive summary

1 International Coffee Organization, 20052 Food and Agriculture Organization, 2004

Executive summary

Coffee and sustainabledevelopment

Coffee has considerable development potential. As itcan only be grown in frost-free areas, in non-aridtropical countries, many developing countries have acomparative advantage in its production. It is a keyexport commodity for many developing countriesbut also important for rural livelihoods as over 70%of production worldwide is on farms less than 10hain size. It is also an important source of employmenton larger farms as it has relatively high labourdemands.

Compared to annual crops, coffee causes lessenvironmental damage, although much depends onhow it is grown. Over the last 20 years, there hasbeen a move to greater intensification of coffee-growing and heavy use of agro-chemicals.

The period of low coffee prices since early 2000s hashad devastating consequences for coffee farmers andproducer countries, with increases in poverty,unemployment, migration and school dropout rates.Declines in prices to growers have not beenaccompanied by declines in retail prices to the sameextent. There is consensus among the numerousstudies conducted that the share of overall revenuesfrom coffee that accrues to the grower and toproducer countries has declined over the last 15years. There is less consensus about the reasons –while everyone agrees that oversupply is a cause,some give more emphasis to changes in marketstructure and the power held by traders, roasters andretailers.

Sustainable coffee certification

Certification schemes have emerged as one approachto try and raise the economic, social andenvironmental standards of coffee production andtrading. There are presently five certificationschemes operating for coffee:

• Fairtrade addresses the trading system, ensuringthat producers receive a minimum price for theircoffee plus a premium for investment incommunity projects. Some environmentalprotection standards are also included.

• Organic certification requires the elimination ofchemical fertilisers and pesticides as well aspractices to conserve or enhance soil structure.

• Rainforest Alliance aims to cover all aspects ofsustainable agriculture: environment, rights andwelfare of workers and the interests of localcommunities. It does not prohibit use of agro-chemicals but requires integrated pestmanagement. It also requires the maintenance ofshade cover and/or the restoration of nativeforest reserves.

• Utz Kapeh also has a comprehensive set ofstandards covering good agricultural practice incoffee production and worker welfare includingaccess to healthcare and education. It emphasisesresponsible production rather than sustainabilityalthough similar issues are covered.

• Bird Friendly coffee certification requires organicproduction and shade cover to provide goodforest-like habitat for birds.

Certification raises concerns about the difficulties ofaccess for small producers because of the high fixedcost element in the application and audit processwhich means that it costs relatively more for smallproducers. Fairtrade certification is specificallyaimed at small producers and both the direct andindirect costs are low. However, only a smallproportion of fair trade production capacity iscurrently sold at fair trade prices so this type ofcertification can only help a small proportion ofproducers. Evidence of the impacts of coffeecertification around the world is mixed but generallypositive for fair trade in terms of producer benefits(although for relatively small numbers of producersas supply exceeds demand), and more mixed forother certifications depending on the location andthe practices of growers before certification.

Brazil’s experience with coffeecertification

Our survey of coffee growers in Brazil gives findingsbroadly consistent with this picture worldwide.Revenues for certified coffee growers have generallyincreased as a result of certification, and access toexport markets has been facilitated. This isparticularly striking for the Fairtrade certifiedgrowers. The evidence from the Cooperativa dosAgricultores Familiares de Poço Fundo, one of thesix co-operatives of small coffee farmers in Brazilthat are certified Fairtrade, is that achieving thiscertification has made a marked improvement totheir living conditions.

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From bean to cup

Organic producers have also benefited but are seeingthe differential with conventional coffee diminish ascoffee prices increase. For some organic producersthe price premium does not compensate for theadditional costs of production in terms of reducedyield. Premiums have also declined for the UtzKapeh scheme but here it appears that market accessand the ability to negotiate long-term contracts aremore important as benefits of certification.

There is evidence also that it is not just the coffeefarmers who are benefiting but also estate workersand local communities. Large companies are takingmeasures to meet the social requirements of certifi-cation schemes. While some observers point out thatcompanies are simply meeting their legal require-ments, enforcement is lax in Brazil so additionalincentives to meet legal requirements are useful. Thereare also important environmental benefits associatedwith all four types of certification, particularly inrelation to reduced or better managed use of agro-chemicals and, in the case of Rainforest Alliancecertification, the restoration of native vegetation.

Certification in Brazil has so far mainly been takenup by large and medium coffee growers. Thisunderlines the important contribution of theFairtrade certification system which targetssmallholder co-operatives. It is notable thatcompared to the other certification schemes,Fairtrade has proceeded relatively slowly in Brazil.Utz Kapeh, introduced relatively recently, is now themost extensive coffee certification scheme in Brazil. Itis therefore important that the Utz Kapeh andRainforest Alliance schemes are seeking ways towork more with small producers and that someproducer groups are in the process of certifying withUtz Kapeh. Whatever the certification scheme,maintaining and improving the quality of coffee isvital to securing access to new markets.

Coffee certification in Vietnam

The enormous growth of Vietnam’s coffeeproduction has been achieved with significantenvironmental impact in terms of deforestation andwater use. As coffee is mainly a smallholder crop, toa large extent grown by poor people and ethnicminorities, the fluctuation in world prices has beendevastating in its social impact.

Evidence from Vietnam on the impact of certificationis very limited because certification is so new and

only Utz Kapeh has any presence, and then onlywith state-owned companies. These companies haveincurred costs in meeting the social requirements ofUtz Kapeh. While these costs exceed the pricepremiums, the companies concerned appear to becommitted to certification and considerableexpansion is expected of Utz Kapeh in Vietnam.

Markets for certified coffee

The report reviews the status of certified coffee infour markets, Denmark, Finland, Portugal and theUS, all significant coffee consuming countries butwith varying interest in certification. Brazil is a majorsource of imports for all these four countries.

Organic certification is currently the most significantof the coffee certification schemes in terms of salesbut Utz Kapeh and Rainforest Alliance areexpanding rapidly as they target roasters such asSara Lee and Kraft. There is variation in the leveland growth of demand for certified coffee by countryand by certification scheme. Fairtrade is stagnant inDenmark but expanding rapidly in US and Finland.As yet, it is not clear whether the emergence of newcoffee certification schemes such as Utz Kapeh andRainforest Alliance will expand the market or lead toincreased competition for more established schemessuch as Fairtrade and organic. Much will depend onhow the schemes and their unique characteristics arecommunicated to consumers.

Certified coffee appears relatively expensive becauseof the use of conventional coffee in some countries(Denmark and Finland) as loss leaders withsubstantial discounts. This is a significant barrier toexpansion of certified coffee.

Where discounts are not used, it is very difficult forconsumers to compare prices on a rational basisbecause so little information is given on the originsand quality of the mainstream coffee brands. There isso much variation in the price of coffee, dependingon the brand and the outlet.

There are also non-price barriers to the expansion ofcertified coffee consumption. Where countries havemarked preferences for a particular coffee taste, as inFinland and to a lesser extent Denmark, thisrepresents a barrier for certified coffee which ofteninvolves single origin products or is unlikely tomatch the traditional taste. There are also concernsabout the low visibility of certified coffees in the

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Executive summary

countries examined in this study, particularly inPortugal.

A recent development is the entry of large roastingcompanies into certification. While the adoption ofcertified coffee appears to be a positive developmentthat may result in an expansion of demand, someobservers have raised concerns about the motives ofthe companies and the impacts on other Fairtradeand sustainable certified coffees. The dominantapproach is to add a new certified brand to theportfolio of brands to attract a different group ofcustomers. So far, there is little indication that themainstream coffee roasters intend to use certifiedcoffee on any major scale in their established brands.

There are concerns about the effects on consumers ofmultiple certification schemes as more schemesbecome established eg Utz Kapeh and RainforestAlliance in markets such as Denmark whereFairtrade has dominated the certified niche.However, similar fears raied in the US a few yearsago have proved unfounded and knowledge aboutcertification among consumers and the industry hasgenerally increased.

Linking up producers andconsumers

The report presents some illustrative case studies ofcertified commodity chains in order to show thelinks between impacts at the local level in Brazil andthe consumers who buy the certified coffee inDenmark, Finland and the US.

• The Cooperativa dos Agricultores Familiares dePoço Fundo of small family farmers, certifiedunder the Fairtrade scheme, exporting to US andalso to Denmark.

• The Fazenda Santa Terezinha, a small-mediumcertified organic coffee grower employing hiredlabour, exporting to Finland via the UK.

• Ipanema, one the largest coffee estates in Brazil,certified under Utz Kapeh and RainforestAlliance, exporting to Denmark and to the US.

A number of key observations can be made:

• The importance of buyer interest even when otherlinks in the chain may be driven more byphilanthropy.

• The role that quality plays in facilitating the saleof certified coffee, whether Fairtrade, organic orother schemes.

• The uneven acceptance of certification, as thechains show a trader who does not like ‘causecoffees’ but still buys organic coffee and buyerswho pay a premium for certified coffee but do notput a label on the package.

Recommendations

Consumer organisationsConsumer organisations should work to upholdconsumer rights to a healthy environment, toeducation and to information in appropriate andunderstandable languages. They can help to expanddemand for certified coffee by:

• Explaining to consumers about the differencesbetween coffee certification schemes and therationale for price differentials between differenttypes, qualities and brands of coffee.

• Lobbying mainstream roasting and retailers tomake a more substantial commitment to certifiedcoffee, for example making certification arequirement for all own label coffee.

Consumer country governmentsGovernments in consumer countries need to revisitrequirements on companies to make informationavailable to consumers. At present, consumers arenot given enough information about the quality andorigins of conventional coffee to compare prices ofcertified and conventional coffee on a rational basis.

Institutional buyers of coffee in the public and privatesectors (local governments, hospitals, large companiesetc) can lead the way by buying certified coffee forstaff, customers, patients, etc, to raise awareness andmake such coffee more visible for consumers.

Certification organisationsOn the demand side of the market, certificationorganisations need to:

• Improve the visibility of certified coffee andprovide more information on how the variouscertification schemes differ.

• Promote certified coffee through buyers‘networks (if necessary creating a separate

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From bean to cup

organisation for this purpose to avoid conflicts ofinterest) and adopting strategies which takeaccount of national cultural conditions of thecoffee market, eg in Finland creating a Fairtradeor sustainable equivalent to the ‘Paula Girl’.

On the supply side of the market, at the producerlevel, certification organisations need to:

• Streamline their application and evaluationrequirements so that multiple certifications (iefrom more than one scheme) can be obtained atlower cost.

• Step up their efforts to promote groupcertification and find ways of reducingcertification costs for small producers.

Coffee importers and roastersassociation/specialty coffee associationsThese organisations should promote greatertraceability and transparency. They can also provideinformation to consumers to help them understandthe differences in prices between conventional coffeeof different types and certified coffee of differenttypes.

RetailersRetailers can support certified coffees by:• Improving the visibility and expanding their

range of sustainable certified coffees.

• Including in the company’s policy a significantcommitment to increase their supply ofsustainable certified coffee, for example bymaking it a requirement for all own label coffee.

Donor agenciesDonor agencies can take action on both the supplyside and demand side of the market. On the supplyside they can support measures to reduce barriers tosmall-scale producers entering certification, and topromote the formation of coffee producerassociations and groups. On the demand side,donors can support establishment of certified coffeebuyer networks and activities to promote demandfor certified coffee.

Further research needsDevelopments in certification change rapidly suchthat the short-term impacts of certification may bearlittle relation to the long-term outcomes. It istherefore necessary to track the longer-termeconomic, environmental and social impacts ofcertification as initiatives become more established.

It is also important to assess the impact of multiplecertification schemes and the move by themainstream companies into certified coffee. Willthese two developments expand the market forcertified coffees or will they take business away fromthe existing specialist fair trade and certifiedsuppliers?

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is a 20-minute documentary to accompany this report. It looks at the maintypes of sustainable certified coffees and assesses the benefits forcoffee producers and consumers.

Just Coffee follows the certified coffee chain from the farms of Brazil to the supermarket shelves of consumer countries. Itincludes exclusive interviews with certified coffee farmers,roasters, consumer representatives and some of the majorplayers in the international coffee sector.

Just Coffee is a compelling introduction to coffee certificationand provides an ideal educational tool for anyone interested insustainability, fair trade and social responsibility.

For a DVD please e-mail: [email protected]

The DVD is free to NGOs and academic institutions and $US 5 to others.

Just Coffee: how consumer choice impacts on coffee producers and the environment

Background

Coffee is one of the world’s largest tradedcommodities, produced in more than 60 developingcountries, and consumed mainly in developedcountries with over US$70 billion of retail sales eachyear.1 At least 14 countries depend on coffee for 10%or more of their export earnings and in the case ofthree least developed countries – Burundi, Ethiopiaand Uganda – for more than 50%.2

It is estimated that coffee growing provides alivelihood for some 25 million people and that intotal 100 million people are involved in the sectorfrom agriculture through to processing and sale.Three countries – Brazil, Colombia and Vietnam –account for almost 60% of world production.3

Between 1997 and 2001 coffee prices fell by 70% innominal terms and to below the costs of productionin many producing countries4 with drasticimplications for rural livelihoods. The InternationalCoffee Organization (ICO) in its 2002/3 AnnualReview observed that the crisis was the worst in thehistory of coffee ‘with low prices giving rise togrowing levels of poverty, unemployment, socialviolence and unrest in producing countries’. Theslump in world coffee prices in 2000-03 led a numberof organisations, including Oxfam, to focus attentionon the adverse impacts on coffee producers incomparison with the healthy situation of companiesinvolved in trading, roasting and retailing indeveloped countries. Prices have since improved butare still relatively low and very variable. Someanalysts5 are concerned that even if consumptionincreases, the volatility of prices is likely to recur.

Over the last few years a number of certificationschemes for coffee have come to prominencebuilding on established organic certification schemes.Much hope has been pinned on these emergingsustainable coffee initiatives which aim either to pay

Chapter 1

Introduction

Introduction

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fair prices to coffee growers and/or to reward themfor improvements in the social and environmentalconditions of coffee production. Labels and claimsoffer options and opportunities to communicateadded value to consumers. Consumers can use theirpurchasing power to support products that meettheir expectations, not only in terms of quality butalso the social, economic and environmental charac-teristics of their production, and to avoid productsthat do not.

But consumers are now facing a growing complexityof ethical and environmental claims in coffee andthere is concern about confusion and lowering ofstandards. It is also possible that certification maybecome another requirement for market access and abarrier for small producers. In this case, certificationmay be an advantage for large coffee estateproducers and irrelevant for the majority of smallcoffee farmers. The key issue is whether certificationinitiatives can help to address the social, economicand environmental problems of coffee productionand improve the livelihoods of coffee farmers.

One important factor is the consumer and how theyrespond to the presence of certified coffee of differenttypes on retailers’ shelves. This will depend onfactors related to their income, aspirations and ethics,as well as the reality of the impact of certification onthe ground and how this is conveyed to them. Oftenthere is a gap between reality and perception.

For this reason, Consumers International (CI) andmember organisations in coffee producer andconsumer countries (see Annex 1 on page 59 fordetails) have teamed up with the InternationalInstitute for Environment and Development (IIED) toexamine the impact of certification along the coffeecommodity chain from producer to consumer and toexamine the market for certified coffee and how itcan be expanded.

1 International Coffee Organization, London, 20022 International Trade Centre, Geneva, 20023 Ibid.

4 Food and Agricultural Organization (FAO), Rome, 2004.5 Eg Lewin, B, et al, 2004

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Aims of the report

The report aims to:

• understand the differences between the economic,environmental and social impact of sustainablecoffee and conventional coffee

• understand how the coffee commodity chainworks and uncover factors that influence prices ofsustainable and conventional coffee along thechain from grower to retailer

• understand who is capturing benefits or incurringcosts from sustainable coffee compared withconventional coffee

• explore drivers of and barriers to sustainablecoffee production and consumption along thecoffee commodity chain given the structure of thecoffee industry and increasing concentration intrading, roasting and retailing.

This report is targeted primarily at stakeholders whocan influence consumption patterns in developedcountries, as this is where the growth in certifiedcoffee demand can be expected for the near future.Our conclusions and recommendations are aimed atgovernments, certification organisations, consumerorganisations, coffee roasters and exporters,importers and retailers. However, it is also importantto share the results with the providers of informationin both producer and consumer countries.

Approach to research

Research on coffee production was carried out inBrazil and Vietnam, the two largest producers ofcoffee. Research on coffee consumption was carriedout in Denmark, Finland, Portugal and the US. Thechoice of countries reflects their importance as coffeeconsumers and producers and the interest shown byconsumer organisations in those countries in thetopic of sustainable consumption.

The questionnaires were adapted from a studycarried out by the Centro de Inteligencia sobreMercados Sostenibles (CIMS) on price formation ofcertified and conventional coffee in Central America.6

The main research method in the two producercountries was a questionnaire sample survey forproducers in Brazil and Vietnam, and additionallywith exporters and roasters in Vietnam,supplemented by semi-structured interviews withkey informants. In both countries, the questionnairewas used during a visit to the farm or companypremises. In the case of Brazil, a follow-up visit wasmade to a selection of the farms in order for thewhole project team to be acquainted with theconditions of production and to conduct more in-depth discussion with the farmers.

In the consumer countries, an effort was made to usesimilar questionnaires for importers, roasters andretailers but there was considerable unwillingness toanswer the questions on the grounds of commercialsensitivity. As a result, response rates were very lowand, where returned, questionnaires wereincomplete. The researchers therefore relied ontelephone and personal interviews with some keyplayers in the market for certified coffee along thecommodity chain. There was also an examination ofprices of certified and conventional coffee indifferent retail outlets in Finland and the US.

Limitations of the research

As the research focuses on important producercountries, it does not capture the experience incountries such as Mexico and Costa Rica wherecoffee certification is most advanced. Nevertheless,the experience with certification in these countrieshas been well studied, while that of Brazil is

6 CIMS, 2004

Luis Guedes Pinto, Maryanne Grieg-Gran and TorstenRaagaard, at IDEC, Sao Paulo, Brazil, October 2005

Introduction

13

relatively under-researched. Our survey of Brazil canadd to the knowledge base on the impact ofcertification.

Another limitation has been the lack of informationon the various links along the coffee commoditychain. A detailed representative sample survey oftraders, roasters and retailers linking producers withconsumers was not possible given the resourcesavailable to the study and the concerns aboutcommercial sensitivity. We have examined threecoffee commodity chains to give an idea of thedifferent experiences and drivers in different cases.But these serve as illustrations only and cannot beused as a basis for generalisation.

Structure of the report

The following chapter discusses coffee in the contextof sustainable development giving a background tothe coffee commodity chain and the economic, socialand environmental issues associated with it. Chapter3 introduces the main certification schemes thatoperate for coffee and sets out the concerns andhopes that have been raised by this newdevelopment in the coffee sector. Chapter 4 is anexamination of the experience with coffeecertification in Brazil and Vietnam, the impacts oncoffee-growing areas and the extent to which theseconcerns and hopes have been realised in practice.Certification is barely emerging in Vietnam so thediscussion here focuses more on potential for futureprogress.

Chapter 5 examines the market for certified coffee inthe four consumer countries – Denmark, Finland,Portugal and the US – considering the barriers andopportunities for expansion. Chapter 6 links theproducers to the consumers through case studieswhich trace the impact of certification along thechain from grower to consumer. Chapter 7 presentsconclusions and recommendations.

The project team and coffee farmers in Minas Gerais,October 2005

From bean to cup

14

Background to the coffee chain

There are two main coffee species: arabica whichaccounts for 60-65% of supply and robusta whichaccounts for 35%, compared to only 25% some 20years ago. Arabica fetches higher prices, but robustais easier to produce, more resistant to diseases andcan be grown at lower altitudes.7 Arabica is mostlyproduced in Latin America but there are also largesuppliers in Ethiopia, Kenya, India and Papua NewGuinea. Robusta is produced mainly in Vietnam andBrazil.

Coffee goes through a number of stages from thegrower to the final retail outlet: preliminaryprocessing, milling, export, import, roasting,wholesale, retail. The basic stages are set out in Box 1.

Trends in the structure of thecoffee commodity chain

The nature of this commodity chain and therelationships between players at different stages andbetween stages have changed over the last 15 years.Between 1962 and 1989, coffee was subject to aninternational commodity agreement, theInternational Coffee Agreement (ICA). Export quotaswere agreed for signatory countries with a view topreventing fluctuations in supply and price and toensure that price remained at a reasonable level inrelation to costs of production.

The ICA broke down in 1989 and there were alsoother significant changes on the world market. Manyproducing countries had state-controlled coffeemarketing boards which bought the output fromproducers, and exported it, ensuring that ICA quotaswere observed. The move to structural adjustmentfrom the late-1980s onwards resulted in the break up

Chapter 2

Coffee and sustainable development

of state marketing boards and their replacement byprivate sector traders and exporters. New producersof coffee came on to the market, notably Vietnamwhich in 1980 produced only 8,400 tonnes and by2004 had increased its production tenfold to 890,000tonnes.10

Trading became increasingly consolidated atinternational level after the collapse of the ICA in1989. There was a period of restructuring which sawmid-sized traders go bankrupt, merge with others orbe taken over by the major traders.11 Five companies,Dreyfus (France), ED & F Man/Mercon (UK), Esteve(Brazil), Neumann (Germany) and Volcafe(Switzerland) cover about 40% of the total volume ofgreen coffee traded worldwide.12

Roasting is consolidated as a sector with fourcompanies, Sara Lee, Kraft/Philip Morris, Procterand Gamble and Nestlé, buying half of all greenbeans traded, and the top ten companies accountingfor 60-65% of all sales of processed coffee in 2000.13

There has been very little vertical integrationbetween roasters and international traders, with oneexception being Tchibo which has verticallyintegrated all the way into estate production inTanzania.14 Some roasters are said to source fromlocal exporters as well as international traders inorder to reduce their dependence on any one actor.15

In 2003, only 6.9% of coffee exports from producingcountries were in the form of instant or roast orground beans and most of this was instant.16 Talbot17

explains how roaster companies in the US andEuropean countries in the first half of the 20thcentury developed distinctive national blends basedon the types of coffee that had been available fromformer colonies or other historic links. US blends, forexample, were based on Brazilian blends while inFrance, coffee blends had a high proportion ofRobustas, as these were common in West Africa.

7 Scholer, M (2004)10 VINASTAS and VICOFA, 200511 Ponte , S, 200112 ITC, 200213 Ibid.

14 Ponte, S, 200115 Ibid.16 ITC, 200517 Talbot, JM, 2002


15

GrowingOnce planted, coffee takes about three to five years to reach full yield, but will then continue yielding coffeecherries for at least 20 years. This means that supply is price inelastic in the short-term. Factors thatsignificantly affect supply are frost, drought and coffee berry disease. Coffee can be grown with shade cover orin full sun. The main factor that affects the quality of the coffee at this stage and hence the price to thegrower are the choice of species, whether arabica or robusta, and the altitude at which the coffee is grown.High altitude usually results in higher quality. Other factors affecting the quality are the approach to picking(the extent to which unripe berries are picked).

Preliminary processing8

This normally takes place on the farm or estate, but occasionally farmers sell unprocessed cherry to localtraders. Two main types of on-farm processing method exist: dry and wet. This gives rise to a further sub-classification of arabica coffees into unwashed or natural arabicas resulting from the dry processing method,and washed arabicas resulting from the wet method. Coffee produced by the wet method is usually regardedas being of better quality as it is more homogeneous with fewer defective beans. It therefore commands higher prices.

The dry method involves sorting to separate unripe, overripe or damaged cherries, and cleaning to removetwigs and dirt. Cherries are then dried in the sun and on larger plantations, mechanical drying will also beused to speed up the process. Drying has a crucial effect on quality as over-drying will result in brokenbeans and insufficient drying will lead to fungal attack.

Wet processing requires specific equipment and substantial amounts of water. Removal of the fleshy pulp isfirst done mechanically and the residual pulp is then often removed through a fermentation process. Thefermentation process requires monitoring as the coffee can acquire sour flavours. This is followed bywashing in tanks or machines and then drying in the sun or in machines to give parchment coffee. As withthe dry processing method, the drying process can affect quality. In Brazil, the fermentation process is rarelyused in wet processing and only mechanical methods are used.

The dry method is used for 95% of arabica coffee in Brazil, most arabicas from Ethiopia, Haiti and Paraguayand almost all robustas. The wet method is used for most other arabicas and rarely for robustas.

Secondary processing (hulling)Farmers sell the dry cherry or washed parchment to the processing mill, either directly or via a localmiddleman, or in some cases pay the mill to do the processing for them. Large plantations have their ownprocessing operations on site. The hulling process removes the outer layers of the dried cherry, or theparchment in the case of wet processing. This is followed by a number of cleaning, screening, sorting andgrading operations common to both wet and dry processing.

Export/importFrom the mill the coffee goes to a trading company, directly or via an intermediary, either for export or lesscommonly to local roasting companies for domestic consumption.

RoastingRoasting of coffee beans usually takes place in the consuming country or close to point of final sale becauseof its short shelf-life compared to green beans.9 Blending of different types of coffees to achieve a desiredtaste is also an important activity of the roasters.

RetailRoasted beans and/or ground coffee is then sold to retailers or to commercial catering outlets or coffeehouses either directly or via a wholesaler.

Box 1: The coffee commodity chain

8 Except where otherwise, stated this section draws from the ICO website: http://www.ico.org/field_processing.asp9 Fitter, R and Kaplinsky, R, 2001

Blending enables roasters to substitute coffee withinthe four broad types (robustas, unwashed arabicas,medium quality and high quality washed arabicas)according to price and availability, while maintaininga consistent taste. More recently, new technologiessuch as steam cleaning have enabled the roasters touse lower quality beans in their blends and so reduce costs.

At the retail level several trends are noticeable:

• increasing concentration in supermarket chains • shorter supply chains as supermarkets strip out

some tiers of intermediaries • increasing out-of-home consumption of coffee

with the increasing popularity of the café cultureand the emergence of global café chains likeStarbucks.

In spite of the development of private coffee labels bysupermarkets, the roasters have been able tomaintain their brands, but at the expense of heavyadvertising.18

The development potential of coffee

The importance of coffee to developing countries iswithout question. As ICO (2003) points out, sincecoffee can only be grown in frost-free areas it isimportant for non-arid tropical countries, many ofwhich are Least Developed Countries (LDCs). Coffeeis a key export commodity for developing countries,providing employment, cash income and foreignexchange.

Coffee is also important for rural livelihoods.Smallholder involvement in coffee production is veryhigh. According to Oxfam,19 70% of production in2000 was on farms less than 10 hectares, 15% onmedium size (10-50 hectares) and 15% came fromplantations of over 50 hectares. Coffee has relativelyhigh labour demands compared with othertraditional smallholder crops. In Guatemala, forexample, coffee requires 73 person-days per hectarecompared to 58 for corn and 61 for beans.20 Ittherefore is a key provider of rural employment.However, a trend to large-scale, low-cost production,primarily in Brazil and Colombia, is threatening thismodel of production.

Coffee growing like all agriculture has anenvironmental impact. However, this has to be seenrelative to other crops or land uses. As a perennialtree crop it provides some soil cover. Given the lifespan of the coffee plant, the soil is prepared only oncein 20 years so that there is minimal disturbance. Ifappropriate techniques such as mulching and controlof pests and disease are followed over the lifespan ofthe coffee plant, the soil is protected more than forannual crops.21 Traditional shade coffee is consideredto be the most environmentally benign andecologically stable agro-ecosystem in northern LatinAmerica.22

Concerns about coffee

Coffee is associated with a number of concerns withinter-related economic, social and environmentalimplications:

• declining and variable prices which have knock-on effects for social welfare and environmentalimpact

• declining shares of revenues for producercountries and growers

• poor conditions for farmers and workers on coffeefarms

• deterioration of the local environment.

Declining and variable pricesBetween 1997 and 2001 coffee prices fell by almost70% in nominal terms, falling to below the cost ofproduction in many countries.

23Prices reached their

lowest levels for 30 years in nominal terms and for100 years when adjusted for inflation.

24These price

trends had severe consequences for coffee growerswho were forced to sell below cost and saw theirincomes drastically reduced. Economic losses forsmall coffee farmers have been estimated at US$4.5billion per year and with further knock-on effects onchildren’s education and healthcare.25 The loss offoreign exchange also led to fiscal constraints forgovernments of coffee-producing countries such asEthiopia and Nicaragua.26

During the last three years there has been someimprovement in prices – the ICO composite priceindicator increased by 30% between 2002 and 2004and there have been further increases in 2005. TheICO is predicting that production in 2005/06 will be

From bean to cup

16

18 Ponte, S, 200119 Oxfam, 200220 Rice and Ward, 199621 Thomaziello, RA, et al, 2000.22 Rice and Ward, 1996

23 FAO, 200424 Lewin B, et al, 200425 Ibid.26 ICO, 2003


17

108 million bags (down from a high of 122 million in2002) and below world consumption estimated at 115million bags in 2004.27 This reflects reductions insupply, mainly arabica, from a number of countries,primarily Brazil but also Indonesia, Cote d’Ivoire andColombia.28 However, supply of robusta has declinedonly slightly from its 2002 peak, reflecting contractionin African producer countries while continuing toincrease strongly in some countries, primarilyVietnam.29

Problems of declining prices are compounded byprice volatility making rational adjustment to pricechanges difficult. According to Baffes30 both arabicaand robusta prices varied by a factor of five duringthe 1990s. The principal contributing factor was theweather conditions in Brazil where frost anddroughts affect the coffee crop every few years.

Recent fluctuations in coffee prices (price levels inSeptember 2005 were the lowest since the beginningof 2005) have shown how factors outside the sphereof coffee production can contribute to this variability.The ICO review for September 2005 emphasises howcoffee prices in September were below expectationsbecause of speculative movement in petroleumproducts, which influenced the activities ofinvestment funds.31

Even if prices do increase, there will still be concernsthat growers are receiving a decreasing share of thecoffee revenues.

Declining shares for growers andproducer countriesThe apparent widening of the gap between pricesreceived by growers and retail prices has promptedstudies comparing the share of the final retail priceaccruing to growers with that of other stages of thevalue chain, and also examining trends in the shareof total value of coffee retained in producingcountries. Some of these studies are snapshotestimates for a single year, others examine trends.Considering them together, there is some indicationof a declining share over time both for growers andfor producing countries:

• Oxfam32 estimated that producer countries in 1992retained about US$ 10 billion or 33% of the retailvalue of coffee but by 2002 they received less than

US$ 6 billion from a market twice the size,equating to less than 10% of the retail value ofcoffee. The growers in 2002 received roughly 6% of the value of a pack of coffee sold in retailoutlets.

• Fitter and Kaplinsky33

using data for 1995estimated that coffee growers received from 10-21% of the retail price and that 40% of the finalproduct price accrued to developing countries.

• Talbot34

examined trends in revenue shares overtime, finding a significant reduction in the shareretained by growers in the late 1980s and early1990s. Between 1975 and 1985 it was consistentlyabove 20%. After the collapse of the ICA in 1989 it ranged between 10-12% until 1993/4 when ashock to supply brought some improvement.

• Studies of specific value chains, Cote d’Ivoire toFrance and Costa Rica to Germany, found that in1994 the grower’s share of total retail price was13.8% and 14.6% respectively.35

• Daviron and Ponte36 examine the trends in greencoffee import prices and retail prices for roastedcoffee in the US between 1980 and 2002. They finda sharp decline in import prices over the periodand a marked increase in the gross marginbetween retail prices and import prices from 80 cents per lb at the beginning of the 1980s toUS$ 1.80 by 2000. This implies that the importingcountry was capturing an increasing share of theretail value of coffee.

Researchers give different emphasis to the variousreasons for this trend in declining grower andproducer country share. All agree that the problem isone of imbalance between supply and demand. Thereis general agreement that oversupply of green coffeeis the principal contributing factor to the slump inprices and that this is more than a cyclical problem,reflecting the short-term inelasticity of coffee supply,but also a result of some major restructuring.37

New low-cost producers have come on to the market,notably in Vietnam and in the Brazilian Cerrado, aregion less susceptible to frost, where a large-scale,highly mechanised, high density and input-intensiveform of coffee farming has become prominent.38

27 IOC, September 200528 IOC, September 2005; ICO January 200529 Ibid.30 Baffes, J, et al, 200531 International Coffee Organization, September 200532 Oxfam, 200233 Fitter, R, and Kaplinsky, R, 2001

34 Talbot, JM, 199735 Pelupessy, W, 1999, cited in Ponte, S, 200136 Daviron, B and Ponte, S, 200537 Oxfam 2002; RIAS 2002; ICO 2002/3; Scholer, M, 2004; Lewin,B, et al, 200438 Lewin, B, et al, 2004

Higher cost traditional smallholder producers are theleast able to compete and are either being forced outof the coffee market or having to look for other waysof increasing their competitiveness.

On the demand side, consumption is increasing onlyvery slowly in developed countries despite theperception of a coffee boom and the emergence ofcoffee shop chains and a coffee culture. Per capitaconsumption has gone down in many countries.39

World consumption for 2004 is expected to be about3% higher than in 2003 but this is primarily due to thegrowth of consumption in exporting countries.40

There is less agreement on the role of market powerheld by roaster companies. Oxfam41 contrasted thelosses, or at best tiny margins, made by farmers andexporters in developing countries with the‘extraordinary profits’ being made by roastercompanies in the US and Europe on their retail coffeebusiness suggesting that the market power held bythese companies was a major contributing factor.

Lewin,42 while acknowledging the importance ofcorporate concentration, places considerableemphasis on two factors. First, the roastingcompanies have been able to take advantage ofvarious value-adding activities such as marketing,branding, differentiation and flavouring. Second, thenon-coffee components of the retail price of coffeesuch as wages, packaging and marketing have grownand now represent a more significant share of theretail price than the coffee itself. The ICO stresses theproblem of too much low-quality coffee andinsufficiently dynamic growth in consumption butalso acknowledges that the value chain is skewedagainst producers.43

May et al 44 argue that while there may becircumstantial evidence of roaster influence on retailprices there is little evidence of roaster influence onworld market prices for green coffee. This is becauseconcentration in the physicals market is not reflectedin the futures market where benchmark prices areestablished – roasters, traders and investors interactin the futures market creating a more competitiveenvironment. A report by Rabo InternationalAdvisory Services is also sceptical about the extent ofmarket power of the roasters, pointing out that

From bean to cup

national and international (EU) competitionauthorities monitor them and have so far notidentified monopolies and/or cartel-like behaviour.45

Gibbon46 has reviewed a number of econometricstudies of market power carried out for periodsranging from 1972 to 2001. These examine either therelation between final prices and firm-level marginalcost or the extent of price transmission – that is, theextent to which input price changes translate intooutput price changes, taking into account elasticityof demand. He finds that these studies give littlesupport to a hypothesis of market power being heldby roasters and retailers. However, he points out thatthese studies mostly examine periods when greencoffee bean prices were rising.

This review included a study of the Swedish marketby Durevall47 who has also studied market structurein Finland and Denmark and has not found evidenceof collusion or lack of competition in Nordicconsumer markets. He concludes that competition inthe coffee consumer market is good. He added that itis changes in demand and consumer preferencesaway from coffee among the generation born after1960 that is driving the distribution of revenuesalong the chain.

Living and working conditions for coffeefarmers and estate workersConcerns are often raised about the wages andworking conditions of coffee farmers and plantationworkers, the use of child labour and the health andsafety implications of handling pesticides.

In 2003 the ICO asked representatives of coffee-producing countries to describe the impact of the fallin coffee prices. The responses summarised below48

indicate how closely linked coffee prices are withrural social development:

• Increase in households under the poverty line(Colombia, Costa Rica, Ethiopia). In Colombia,where coffee provides 30% of rural employment,the percentage of households in coffee-growingareas living under the poverty line grew from51.4% to 61% between 1997 and 2000. The resultsincluded increasing malnutrition and inability topay for children’s education.

18

39 ICO, 2003/440 ICO, October 200541 Oxfam, 200242 Lewin, B, et al, 200443 ICO, 2002/3

44 May, PH, et al, 200445 Rabo International Advisory Services (RIAS), 200246 Gibbon, P, 200447 Durevall, D, 200448 ICO, 2003


19

• Loss of employment for agricultural workers(Cameroon, Costa Rica, Ecuador, El Salvador,Ethiopia, India, Nicaragua, Papua New Guinea,Philippines)

• Increased migration to urban areas or abroad(Cameroon, Central African Republic, Colombia,Ecuador, El Salvador, Ethiopia)

• Coffee-growing families difficulties in payingfor children’s education (Cameroon, Colombia,Cote d’Ivoire, Ethiopia, Ghana, Papua NewGuinea, Vietnam).

The pressure to compete and to reduce costs canleads to poor conditions for farm workers andlimited compliance with the law. Some examples ofpoor practice have been documented for Brazil.

A study of working conditions in coffee farms inBrazil in 2003 found that in the Southern Minasregion, safety equipment was usually not suppliedfor the harvesting, and that it was a common practicefor workers to be prohibited from using glovesbecause of harm to the plant.49 Although the RuralWorkers Union in Southern Minas had agreed aCollective Convention setting out workers’ rights inthe coffee sector, these were not being respected inpractice. While the Convention established a weeklywork shift of 44 hours, the coffee workers had longerhours because they worked Sundays and holidayswithout extra pay. No sanitation facilities or place formeals were provided for workers and protectiveequipment for those applying herbicides andpesticides was often incomplete.

In another coffee-growing region in the state ofEspirito Santo, the study found poor living andworking conditions for hired workers, with noformal signed work papers, and no respecting ofholidays, while paid time did not include travel timefrom the city to the field. Indiscriminate use of agro-chemicals was claimed to have caused considerableharm to farm workers.

Environmental impact of coffeeproduction Coffee tends to be grown in high biodiversity areasand areas of natural forest. The destruction of theAtlantic forest in Brazil in the 19th century owesmuch to coffee50 but deforestation to make way for

coffee has taken place more recently, for example inCote d’Ivoire where the government in a bid toexpand cocoa and coffee production allowed freeaccess to uncultivated areas.51 In Central America,coffee growing is located in some of the principalriver basins of the region. Preservation of the coffee-growing micro-basins is important for the survival ofthe rivers and all the associated flora and fauna.52

Since the 1970s there has been a move in a number ofcoffee-growing regions away from traditionalapproaches involving shade coffee, in the case ofnorthern Latin America, and away from traditionallower yielding varieties, such as bourbon in Brazil(which has little tradition of shade coffee), to verymechanised, input-intensive sun coffee, with denserplanting, high dependence on irrigation and use ofcoffee varieties more suited to chemical fertilisers.New producers, such as Vietnam, started off theirproduction based on sun systems.

The aim was to increase yields. For example,Colombia, in a space of 25 years, went from mainlytraditional systems of coffee to 68% of its coffee areasbeing intensified.53 It has been estimated that shademonoculture and sun coffee account for 40% of thecoffee producing area in northern Latin America.54

This trend has had significant environmental impact.Studies have shown that shade coffee supports adiversity of species and migratory birds. Greenberg55

found that both planted shade coffee plantations andrustic shade coffee (ie grown under a natural forestcanopy) in Ocosingo, Chiapas, Mexico, supported ahigh diversity of bird species, exceeded regionallyonly by moist tropical forest. Coffee plantations

49 Observatorio Social, 200450 Dean, W, 199551 Losch, B, 1992, cited in UNCTAD,199452 Castro F, et al, 2004.53 Rice, RA and Ward JR, 1996

54 Ibid.55 Greenberg, R. et al, 199756 Gillison, AN, et al, 200457 Gooding, K, 2003

Minas Gerais coffee fields, Brazil

appeared to act as a refuge for many omnivorousbird species, in particular migrant birds from NorthAmerica. Gillison et al 56 examined the impact ofdifferent coffee farming systems on biodiversity,along a spectrum from simple, intensive, non-shadedsystems to complex, shaded smallholder systems inSumatra. They found that biodiversity increasedalong this spectrum.

The decline in coffee prices has led to furtherconcerns about the impact on the more environmen-tally friendly smallholder producers. In some cases,the fall in prices has led to replacement of shadecoffee by other crops such as pasture and sugar cane,considered more environmentally damaging.57 InEcuador, shade coffee was replaced by annual cropsor grass and there were concerns about theenvironmental impact.58 In India, farmers in shadecoffee areas were ‘tempted to remove trees and sellthem as timber, leading to deforestation and loss ofecological balance’.59

In other cases, falling prices have lead to theabandonment of coffee plantations, encouragingdeforestation elsewhere in order to plant alternativecrops. In Kenya, the low coffee prices in 2002/3,coupled with regulations prohibiting the destruction

From bean to cup

20

58 ICO, 200359 Ibid.60 Gooding, K, 2003

61 UNCTAD/IISD, 200362 Jacquet 1991, cited in UNCTAD, 1994

of coffee plants, led farmers to abandon their coffeeand deforest new areas of forest.60

Processing also has an environmental impact. Wetprocessing of coffee uses substantial amounts ofwater and as the process involves fermentation ofthe residual pulp surrounding the cherry, itgenerates wastewater with high concentration ofbiochemical oxygen demand.61 In Central Americacoffee processing in the 1990s was considered theregion’s most polluting agro-industry. The RioGrande de Táricoles, which runs through CostaRica’s main coffee growing area, was reported to bedevoid of all life at the beginning of the 1990s.62 Well-established treatment techniques exist but add tocosts of production for producers already feeling thesqueeze of lower prices.

Drying sheds at Fazenda Santa Terezinha, Minas Gerais,Brazil (see page 49)

Fairtrade coffee beans in sacks, each marked with the nameof the family farm, Poço Fundo association, Minas Gerais,Brazil


21

The concept of certification

It has been common for companies to makeenvironmental and social claims about their productsoften without substantiation, raising concerns about‘greenwash’ . Certification aims to address theseconcerns in that an outside body assesses theperformance of the company against an agreed set ofstandards, and decides whether the option of using alabel can be awarded. A certification scheme typicallyconsists of the following elements:

• A set of process and performance standards oftenset out as a code of practice, covering differentaspects of the production of the product such asenvironmental impact, health and safetyconsiderations, relations with the local communityand worker rights.

• Independent verification of compliance orperformance with these standards by anindependent organisation usually separate fromthe standard-setting body - the initial verificationis followed up by periodic audits usually on anannual basis with some schemes also applyingunannounced random inspections.

• A system for accrediting the certifyingorganisations that provides the evaluation service.

• A product label to enable producers tocommunicate to buyers/consumers that theproduct meets the standards of the certificationscheme. In this way producers, in theory, canbenefit from the willingness of consumers to payextra for products meeting high environmental orsocial standards as demonstrated by the label.

• Chain of custody certification for those handlingthe product – traders, processors, or a traceabilitysystem – to provide assurance that the labelledproduct in the retail outlet has come from acertified source and has not been falsely labelledor mixed with non-certified products.

Chapter 3


Some of these elements are present in some buyer-driven approaches such as that of Starbucks (Box 2on page 22) and multi-stakeholder initiatives such asthe 4Cs (Box 3) and the Sustainable CommodityInitiative (Box 4). However, there are fundamentaldifferences. Buyer-driven approaches usually involvea company setting its own standards for suppliers toachieve. The 4Cs aim to develop a global code ofconduct for sustainability along the coffeecommodity chain but does not envisage theintroduction of a labelling scheme.

Certification schemes vary in a number of aspects:

• The comprehensiveness of standards, with someschemes such as Fairtrade concentrating on thetrading relationships and leaving detailedenvironmental issues to others.

• The way in which standards are set and theextent of stakeholder participation, although theostensible aim of most schemes is to achievemulti-stakeholder input.

• The degree of emphasis given to processstandards as opposed to performance standards.ISO 14001 and the certification system of theBrazilian Specialty Coffee Association (BSCA), forexample, certifies management systems, requiringcontinuous improvement rather than achievementof determined performance standards.

Certification schemes for coffee

At present there are five certification and labellingschemes operating for coffee:• Fairtrade • Organic • Rainforest Alliance, • Utz Kapeh• Smithsonian Bird Friendly.The schemes and their distinguishing characteristicsare summarised in Table 2 on page 28.

From bean to cup

Starbucks piloted a Preferred Supplier programme tolink preferred supplier status with social andenvironmental performance. Price incentives,offering a premium over the market price, werebased on a points system for environmental (50%),social (30%) and economic criteria (20%). In addition,the programme offered long-term contracts toprovide some stability for producers. By the end of2004, 248 suppliers representing 20 countries hadapplied and more than 50 million lbs (22,700 tonnes)of coffee had been purchased by Starbucks underthis programme over the two year period.

This programme was relaunched in March 2004 asthe Coffee and Farmer Equity (C.A.F.E.) Practices.One of the significant changes was to make supplychain transparency a pre-requisite. Starbucks aimsto purchase the majority of its coffee under theseguidelines by 2007. The evaluation guidelines coverproduct quality, (essential requirement); economicaccountability (essential requirement); social

responsibility (40 points); environmental leadershipin coffee growing (45 points) and in coffeeprocessing (20 points). A preferred supplier has tomeet the essential requirements and a score of atleast 60% of the maximum possible scores for eachsubject area.

The social and environmental guidelines arecomprehensive, covering hiring practices andemployment policies, worker conditions, protectionof soil and water resources, conservation ofbiodiversity, ecological pest and diseasemanagement and reduction of agrochemical use,waste management and energy use. They stress theimportance of equity of financial reward. ‘It isexpected that Starbucks coffee suppliers will passon an equitable share of coffee revenues (ie financialrewards) up the supply chain to coffee farmers andprocessors.’

Source: Starbucks, 2004

22

Box 2: Starbucks – C.A.F.E. Practices

This is a joint initiative of coffee producers, tradeand industry, trade unions, and social andenvironmental NGOs to develop a global code ofconduct aiming at social, environmental andeconomic sustainability in the production, post-

harvest processing and trading of mainstream greencoffee. It is supported and facilitated by DeutscherKaffeeverband and GTZ.

Source: www.sustainable-coffee.net

Box 3: The Common Code for the Coffee Community – 4C

The United Nations Conference on Trade andDevelopment (UNCTAD) and the InternationalInstitute for Sustainable Development (IISD)launched the Sustainable Commodity Initiative(SCI) in December 2002 in recognition of thefundamental link between commodities andsustainable development. The principal objective ofthe SCI is to improve the social, environmental andeconomic sustainability of commodities productionand trade by developing global multi-stakeholder

strategies on a sector-by-sector basis. The first phaseof the SCI will focus on the identification ofstrategies for the coffee sector. The coffee phase willbuild upon existing initiatives with the objective ofidentifying novel ways for addressing supply chainand market issues in a co-ordinated way that issuitable for substantial application in the coffeesector.

Source: www.iisd.org/trade/commodities/sci.asp

Box 4: The Sustainable Commodity Initiative


23

Fairtrade63

The fair trade criteria defined bythe Fairtrade LabellingOrganization (FLO), which is theumbrella group for various fairtrade organisations in differentcountries, include a minimumproducer price which variesaccording to the type of coffee and the region, asshown in Table 1 (below). If the market referenceprice (the New York C contract price plus or minus aquality differential) is higher than the Fairtrademinimum price, the market price applies. Inaddition, a Fairtrade premium of 5 US cents per lbof green coffee is paid on top of the minimum ormarket reference price. Where coffee is certifiedorganic as well, an additional premium of 15 UScents per lb of green coffee is paid.64

Registration with FLO is at the group level. Toqualify for the Fairtrade system, smallholders haveto be organised into producer groups or co-operatives which must be democratically run andpolitically independent. The Fairtrade premium ispaid to the group, usually for investment in group orcommunity projects, and its use is monitored. Someenvironmental protection standards are included inthe standards for Fairtrade coffee including a ban onthe most toxic pesticides and requirements toimplement Integrated Crop Management.65 Fairtradeimporters are also required to offer pre-financing toproducer groups if requested.

As of March 2004, there were 197 coffee co-operatives working with the FLO initiatives. Most

of these were in Central America (93), South America(63) and the Caribbean (9), as well as 27 in Africaand 5 in Asia.

Coffee was the first Fairtrade labelled product ,launched in 1989 and is still the best knownFairtrade labelled product among consumers inEurope, North America and Japan. Sales of roastedFairtrade coffee in 2004 were 24,323 tonnes,corresponding to about 0.42% of demand.66 Thelargest markets for Fairtrade coffee in 2004 were theUS, followed by the UK, the Netherlands andGermany. Sales worldwide were up 26% from theprevious year and there has been significant growthsince 1999. About 12% of all Fairtrade coffee sales in2004 were also organically certified.

Fairtrade coffee consumption is still confined toimporting countries in Europe and North America.The only producer country where there has been anysignificant consumer interest in the concept of Fairtrade coffee is Mexico but not necessarily as partof the FLO system.

Mainstream roaster companies have started to takean interest in Fairtrade certification. Towards the endof 2003, after a concerted campaign by Oxfam andother organisations, Procter and Gamble started tosell Fairtrade certified coffee as part of its specialtycoffee business (Millstone), with a commitment toincrease the volume of Millstone’s Fairtrade sales toat least two to three million lbs (909 to 1,363 tonnes)within two years.67 Millstone sells Organic Fairtradecertified coffee as part of its ‘Signature Collection’which also includes Rainforest ReserveTM RainforestAlliance Certified.68

Table 1: Fairtrade minimum price

Type of coffee Fairtrade minimum price (US cents per lb)Central America, Mexico, South America,

Africa, Asia CaribbeanWashed* arabica 121 119Non-washed arabica 115 115Washed* robusta 105 105Non-washed robusta 101 101*Semi-washed or pulped natural coffees are regarded as washed coffeeSource: FLO (2004)

63 Except where otherwise stated this draws from information onthe website of the Fair Trade Labelling Organization (FLO) orprovided in personal communication by FLO.64 FLO, 200465 Ibid.66 Based on the ICO estimate of demand for 2004 of 115 millionbags of green coffee (ICO, September 2005) and a ratio of green

coffee to roasted coffee of 1.19. This figure is an underestimate asit does not take account of instant coffee (for lack of data) whichrequires more green coffee per unit of production than roastedcoffee.67 www.globalexchange.org68 www.millstone.com

From bean to cup

Sara Lee has been selling Fairtrade coffee on USuniversity campuses in the dining services since theearly 2000s following a student campaign. Thecompany’s Prebica Whole Planet Blend is certified asFairtrade by TransFair US. It is also certified asorganic and shade-grown. This has been followed bysupply of Fairtrade coffee to other Sara Lee accountssuch as 250 Borders cafés.69

In October 2005 Nestlé launched its Fairtradecertified instant coffee in the UK, known as PartnersBlend. This has proved extremely controversial withheavy criticisms being raised by the Baby MilkAction Group among others.

Some retailers have also taken action to promoteFairtrade coffee or to position themselves as sellersof Fairtrade coffee. The Co-op was the first UKsupermarket to switch all its own label coffee toFairtrade in November 2003. Marks and Spencers inthe UK has a policy of using only Fairtrade coffee inits store cafés.

Organic

Requirements of organiccertification systems involvemanagement practices toconserve or enhance soil structure, resilience andfertility and use of non-synthetic nutrients and plantprotection methods.70

Unlike other certification systems, organiccertification standards are often set or regulated bygovernments. For example, the EU regulations onorganic production71 stipulate the followingstandards:

• cultivation of legumes, green manures or deep-rooting plants in an appropriate multi-annualrotation programme

• incorporation in the soil of organic material,organic livestock manure and vermicompost

• pests, diseases and weeds to be controlled byusing appropriate varieties, rotation programmes,biological pest control, mechanical practices andflame weeding

• seeds and propagation material organicallyproduced

• use of non-organic fertilisers, pesticides andbiological pest control methods is limited.

The standards formulated by the InternationalFederation of Organic Movements (IFOAM) form thebasis on which public and private standard-settingbodies develop more specific standards.72 Differentstandards apply in different countries or regions, theEU, US and Japan. A transition period of three yearsis usually required before coffee converted to organicproduction can be sold as organic.

The International Trade Centre estimates consumptionof organic coffee in major consumer countries at720,000 bags (43,200 tonnes) in 2002/3, making thisthe most significant of the certification schemes so farin terms of sales.73 It estimates that world productionof organic coffee in 2001/2002 was 800,000 bags(48,000 tonnes), indicating that there was some over-supply. According to Scholer74 producers havereceived premiums which more than compensate theadditional costs involved in certification such aslabour and, in some cases, lower yields, but there hasbeen a tendency for premiums to decline as organicsupply expanded. In 2003, organic green beanpremiums ranged from 15 cents to 30 cents per lb butwere widely predicted to decline over time.75

Rainforest Alliance

Coffee is one of a number oftropical products certified underthe Rainforest Alliance system.The sustainable agriculturestandards aim to cover all aspectsof production: environment,rights and welfare of workers and the interests oflocal communities. These standards have beendeveloped following a process of consultation withsocial and environmental groups, industry,government and other stakeholders.

Rainforest Alliance distinguishes itself from Fairtradein its emphasis on how farms are managed, ratherthan how products are traded. It differs from organiccertification in that the standards are based onintegrated pest management (IPM) which allows forsome limited, strictly controlled, use of agro-chemicals. It goes beyond organic in its emphasis on

24

69 http://hds.ucsd.edu/diningservices/wholeplanet.pdf;http://www.transfairusa.org/content/about/n_040227.php 70 Lewin, B, et al, 200471 International Trade Centre, Geneva, 2005, The Coffee Guide,www.thecoffeeguide.org

72 Dankers, C, 2003 73 International Trade Centre, Geneva,, 200574 Scholer, M, 200475 Giovannucci, D and Koekkoek, FJ, 2003


wildlife conservation and worker welfare. Certifiedcoffee farms are required to maintain diverse shade-cover of native trees to provide habitat for range ofspecies or to protect and restore native forestreserves. All farms are inspected every year and must show continual progress.

The Rainforest Alliance currently operatescertification of coffee farms in 11 countries in LatinAmerica. By October 2005 it had issued a total of 268 certificates for 2,822 operations involving 40,920hectares of coffee cultivated in a total farm area of95,115 hectares.76 It is also evaluating or certifyingfarms in Ethiopia and Sumatra.77

According to the Rainforest Alliance, just under 1%of all coffee produced is certified under theRainforest Alliance Scheme (however, not all of this isnecessarily sold as certified). Over the past two yearsthe distribution of Rainforest Alliance Certifiedproducts has grown considerably following efforts topersuade large companies, including roastercompanies such as Kraft, to buy certified coffee. TheRainforest Alliance is working with hundreds ofcompanies, large and small, global and nationalleaders such as Kraft Foods (Kenco, Gevalia andJacques Vabre brands), Procter and Gamble (Millstone),Lavazza, Italy’s market leader, and Ueshima Coffeecompany, the market leader in Asia.78

Rainforest Alliance requires a minimum 30% certifiedcontent for companies who want to use the scheme’sgreen frog label. This facilitates its take up forblended coffee products. A statement that specifiesthe percentage content of Rainforest Alliance certifiedcoffee must appear next to the green frog label.Companies that choose to blend certified productswith non-certified products must have the means toguarantee that the product claim is truthful and maybe required to undergo a chain of custody audit oftheir operation and other points in the supply chain.79

Some high profile users or consumers of RainforestAlliance coffee include the United Nations, whichserves it in all its venues in New York, the BelgianParliament and the Eden Centre in the UK. 80

Of particular interest is the partnership betweenKraft and the Rainforest Alliance in October 2003 to‘advance the availability of certified sustainable

coffees in the mainstream market’. In 2004 Kraftpurchased 5 million lbs (2,273 tonnes) of certifiedcoffee from farms in Brazil, Colombia and otherLatin American countries and expects to double thisquantity in 2005.81 This certified coffee will beblended into several mainstream coffee brands inwestern Europe such as Carte Noire, Kenco andMaxwell House. In addition it has launched 100%certified brands in the UK (Kenco instant coffee) andin the US (All Life) for sale in away-from-home foodservice settings. Kraft has recently launchedRainforest Alliance certified coffee in Denmark andSweden. The entry into the UK market provedcontroversial with concerns being raised about theimpact on Fairtrade. In 2005 over 13 million lbs(5,900 tonnes) of Rainforest Alliance certified coffeewill be available in Kraft brands, doubling theprevious year’s purchase.82

Utz Kapeh83

Utz Kapeh which means ‘goodcoffee’ in a Mayan language fromGuatemala was founded in 1997by Guatemalan coffee producersand the European coffee roaster,Ahold Coffee Company, with theaim of allowing roasters andbrands to respond to a growing consumer demandfor assurance of responsibly produced coffee. UnlikeFairtrade, which works only with smallholders, UtzKapeh is open to all scales of production and typesof ownership including state-owned.

Producers are certified by an independent thirdparty auditor to check that they comply with the Utz Kapeh Code of Conduct which requires baseline standards of good agricultural practice incoffee production, worker welfare including accessto education, and healthcare. A key objective is toenable responsible producers to differentiatethemselves from conventional coffee growers and to link up with responsible buyers. Utz Kapeh alsoaims to channel technical assistance to producers toimprove farm management and lower productioncosts and to improve access to credit facilities.

As of December 2005, there were certified producers(both arabica and robusta) in 16 countries, mostly in

25

76 Luis Guedes Pinto, Director, Imaflora, presentation 14/10/0577 Chris Wille, personal communication, 200578 Sabrina Vigilante, Rainforest Alliance, personal communication,e-mail 14/11/05 79 Ibid.

80 Ibid.81 www.kraft.com82 Luis Guedes Pinto, Director, Imaflora, presentation 14/10/0583 Except where otherwise stated, this section draws oninformation from: www.utzkapeh.org

From bean to cup

Latin America but also in Asia (India, Indonesia,Vietnam) and Africa (Ethiopia, Tanzania, Ugandaand Zambia). The scheme is expanding rapidly. Atthe end of 2004, 61,000 tonnes of green coffee werecertified from a total of 66 producers including co-operatives (up from 38 the year before) in 14countries. As of early December 2005, a total of 131farms and producer groups were certified with totalcertified volume approaching 140,000 tonnes ofgreen coffee. More than 200 additional farms andproducer groups were registered with Utz Kapehand in the process of certifying.84

A key aim of Utz Kapeh is to improve the terms oftrade for producers but the programme does notintervene in price negotiations, nor is there any setpremium or floor price as in other schemes. Thepricing policy states that producers should berewarded with a premium greater than zero forcompliance with the code of conduct and that ifeither a roaster or a producer consistently pays oraccepts low or no premiums they will be excludedfrom the programme. To improve the negotiatingprocess, participants in the programme are giveninformation on the weekly average reportedpremiums per country and the sales per quality percountry. According to Utz Kapeh, this up-to-datemarket information enables producers to negotiate abetter price. Premiums in the second half of 2004,when the Utz Kapeh programme started collectingand reporting this data, ranged from 1 to 9 cents perlb with an average of 4 cents per lb.85 In 2005, theyare approaching 5 cents per lb.86

In addition to the founding company, Ahold, UtzKapeh buyer members include well-known namessuch as Sara Lee, (The Netherlands), ICA (Sweden),Friele (Norway), Safeway (UK), Somerfields (UK),Casino (France), Mitsui (Japan), and Java TradingCompany (US). Sara Lee has formed a partnershipwith Utz Kapeh and plans to purchase 7,500 tonnesof Utz Kapeh certified coffee in its second year of co-operation with the scheme.87

Some producer country exporters and roasters arealso members, in particular: Café Bom Dia Ltda,Exportadora de café Turquesa, Qualicafex andWolthers and Associates of Brazil. Outside of LatinAmerica, the only other producer country member isthe exporter Dormans of Kenya and Esco Kenya

Limited which have now been joined by BombayBurmah Trading Corp Ltd, an Indian roastercompany. At the beginning of November 2005, therewere 161 exporters, traders and buyers registeredwith Utz Kapeh.88 Purchases of Utz Kapeh certifiedcoffee totalled 21,200 tonnes in 2004, up 50% from2003.89 As of December 2005, purchases of certifiedcoffee were approaching 30,000 tonnes for the year.90

Like the Rainforest Alliance, Utz Kapeh is targetingroasters and retailers rather than consumers. For thisreason it is not so concerned about promoting the Utz Kapeh label to consumers. As David Rosenberg,Executive Director of Utz Kapeh, explains,certification is geared to niche markets, involves asignificantly higher price and is positioned to callattention to itself rather than the brand, with theresult that the certification label overshadows thebrand. Utz Kapeh, in contrast, is trying to support thebrand starting from a fundamental premise that isdifferent from niche-positioned certification schemes:consumers expect professional coffee companies totake responsibility for their products and to haveminimum environmental and social standards. Butthey are not willing to pay extra for this.Responsibility is an expected element of a brand’sidentity rather than a unique selling point to increasesales in the short term. Utz Kapeh requires blendedcoffee products to have at least 90% Utz Kapehcertified content for them to have the option of usingthe label. This differentiates it from the RainforestAlliance which has a lower threshold (30%).91

David Rosenberg, Director of Utz Kapeh, says: ‘UtzKapeh makes it possible for brands to make a credibleclaim about their sourcing across the board, rather thanfor a small segment of premium priced products.’

Bird Friendly coffee92

This scheme is operated by the SmithsonianMigratory Bird Center (MBC) of the National Zoo inthe US. Bird Friendly coffee is defined as coffee thatcomes from farms that provide good forest-likehabitat for birds through use of native canopy trees toprovide shade for the coffee. The coffee is also grownorganically, that is without the use of chemicalpesticides. The criteria have been established bySmithsonian MBC based on scientific research.

26

84 David Rosenberg, personal communication, 200585 Utz Kapeh, 200586 David Rosenberg, personal communication, 200587 Utz Kapeh, press release, 12/4/0588 Utz Kapeh newsletter, November 200589 Utz Kapeh, 2005

90 David Rosenberg, personal communication, 200591 David Rosenberg, personal communication, 2005.92 Except where otherwise stated this section draws frominformation provided on: http://nationalzoo.si.edu/ConservationAndScience/MigratoryBirds/Coffee/Farms


The scheme currently operates in four countries inLatin America (Colombia, Guatemala, Mexico andPeru) and involves 12 farms, some of which are co-operatives, and 615 growers on more than 3,600hectares. The amounts of certified coffee producedare small relative to the other schemes: 2,989,841 lbs(1,359 tonnes).

Companies that sell Bird Friendly coffees contribute25 cents per lb to support the research andconservation programmes of the MBC. The coffee issold in the US and Canada through retail stores,internet sales and by mail order. It is also sold inSmithsonian National Zoo stores and restaurants.

As this scheme is not operating in Brazil and Vietnam,the two producer countries that are the focus of thisresearch, it is not considered further in this report.

Key issues raised by certification

Access for small producersA commonly raised concern about certification is thatbecause of the costs involved and the large fixed costelement involved in the certification process, it costsrelatively more for small producers, and thus hastypically been taken up by large producers. Fairtradehas been specifically aimed at small producers; thedirect costs of certification are considerably lower thanfor other certification schemes and the indirect costs ofcompliance are low, as the emphasis on the scheme ison the prices rather than production practices.

However, Fairtrade remains an option available foronly a small number of producers and those that areorganised into democratic associations. Moreover,only about 20% of the global fair trade productioncapacity is sold at fair trade prices.93 The emphasis onhigh quality specialty markets in Fairtrade meansthat there is limited attention to the low end of themarket and in particular to robusta, given that mostFairtrade coffee is arabica.94

Both Utz Kapeh and the Rainforest Alliance arelooking for ways to facilitate access for smallproducers; in the former case partly because buyersare asking for coffee from certain regions whereproduction is predominantly smallholder. Togetherwith the Dutch NGO, Solidaridad, Utz Kapeh has set

up the Coffee Support Network to help producersbecome certified by providing training andimproving management systems.95

Impact on behaviourIt has also been observed that typically the firstproducers to go for certification are those whoseexisting practice is already close to the standardsrequired by certification. Certification merely allowsgood producers to differentiate themselves from poorperformers, but has limited impact on the behaviourof poor performers. This has been observed forcertification in the forestry sector96 and forcertification of a range of organic agriculturalproducts including coffee.97

Benefits to producersThe concern is that because of the tendency for pricepremiums to decrease as supply of certified productsincreases and because of the direct and indirect costsinvolved in certification, little benefit accrues toproducers. Certification becomes a market hurdlerather than a means of achieving benefits.

Experience differs across the different certificationsystems. For Fairtrade coffee, existing studies havemostly concluded that certification has benefited thegrowers. Milford98 who examines the ISMAM andKAFFE co-operatives in Chiapas, Mexico, concludesthat they could not have achieved their level ofsuccess without the Fairtrade and organic premium.Ronchi99 in a study of the Coocafe organisation inCosta Rica finds that Fairtrade certification improvedthe quality of life for the growers although theythemselves had low awareness of the Fairtradesystem. A study of Fairtrade coffee in Bolivia100

showed that the most important effect was theassistance of the Fairtrade premium in achievingquality improvements in the coffee and hence areduction in the quality differential against thereference price of the New York Coffee Exchange.

An earlier study of the experience of coffee co-operatives with Fairtrade in Tanzania in the 1990s101

is more guarded in its conclusions, pointing out thatsince most of the fair trade organisations andimporters deal with the co-operatives the farmers arehardly aware of fair trade, there is a minimal effect onthe price received by the farmer as only a small

27

93 Lewin, B, et al, 200494 May, PH, et al, 200495 David Rosenberg, personal communication, November 200596 Bass, S, et al, 200197 Dankers, C, 2003

98 Milford, A, 200499 Ronchi, L, 2002100 Dankers, C, 2003, citing Eberhart and Chauveau, 2002101 Dankers, C, 2003, citing Jones, S and Bayley, B, 2000

From bean to cup

28

Fairtrad

eO

rgan

icR

ainfo

rest Allian

ceU

tz Kap

ehS

mith

son

ian

Bird

Frien

dly

Mission

History and

development

Requirem

ents for farm

ers

Market focus

and promotion

Price prem

ium

Sales of certified coffee

Table 2: Coffee certification schemes

Ensure equitable trad

ingarrangem

ents ford

isadvantaged

smallhold

ersw

ho are organised into

co-operatives

Began in 1970s as M

ax Havelaar

in Netherland

s. Now

severalnational organisations und

erthe um

brella of the Fairtrade

Labelling O

rganization (FLO

).C

offee first labelled prod

uct in1989

Smallhold

ers organised in

dem

ocratically runorganisations, ban on m

ost toxicpesticid

es, Integrated crop

managem

ent

Niche m

arkets and prom

otionto the consum

er

Floor price of US $1.01-1.21 per

lb depend

ing on type andorigin plus U

S$ 0.05 per lb (US$

0.15 if also organic) on top offloor price or m

arket referenceprice

24,323 tonnes (roast, ground andinstant) equivalent to at least28,944 tonnes* of green coffee(2004)

Create a verified sustainable

agriculture system that

produces food in harmony w

ithnature, supports biodiversityand enhances soil health

Began in early 1970s as a

farming m

ovement and

developed

into internationallyrecognised

system

Use of non-synthetic nutrients

and plant protection m

ethods,

soil conservation

Specialty coffee B

usiness to consumer

US$0.15-U

S$0.30 per lb (2003)

43,200 tonnes (2002/2003)

Integrate productive agriculture,

biodiversity conservation, and

human

developm

ent

Begun in 1992 by R

ainforest Alliance and

acoalition of L

atin Am

erican NG

Os. First

coffee farm certification in 1996

Sustainable farm m

anagement, integrated pest

managem

ent, worker w

elfare, comm

unityrelations, biodiversity conservation throughm

aintenance of shade cover or protection andrestoration of native forest reserves

Specialty coffee and m

ainstream brand

sB

usiness to business

US$0.05-U

S$0.15 per lb (Brazil)

Not available

To enable coffee producers

and brand

s to show their

comm

itment to sustainable

developm

ent in a market-

driven w

ay

Begun in 1997 as initiative

from ind

ustry andpr od

ucers in Guatem

ala.B

ecame an ind

ependent

NG

O in 2001. First certified

cof fee farm in 2001

Good

agricultural practiceand

worker w

elfare, basedon ad

aptation ofE

ur epGA

Pstand

ards

Mainstr eam

brands

Business to business

US 0.01-U

S$ 0.09 per lb –average of U

S$0.04 per lb(2004)

21,200 tonnes (2004)approaching 30,000 tonnesin 2005

Promote certified

coffee asa viable supplem

entalhabitat for bird

s and other

organisms

Founded

in 1997 with

criteria based on scientific

fieldw

ork

Use native canopy trees to

provide shad

e for thecoffee as w

ell as meet

criteria for organicprod

uction

Business to consum

erB

usiness to business

Some gr ow

ers haver eceived

US$0.05-U

S$0.10per lb above the or ganicpr em

ium.

1,359 tonnes

*Assum

ing a green coffee to roasted coffee ratio of 1.19Source: A

dapted from SC

AA

Sustainability Com

mittee (2005) – See text on each schem

e for sources of data on price premium

s and sales.


29

proportion is sold at the fair trade price and that thepremium is not paid to farmers but used for projects.It does however, identify benefits in terms of pre-financing, capacity-building and trade facilitation.

For the other types of certification scheme theexperience is more mixed. While organiccertification appears to have been the most effectivein terms of producer benefits, there is considerablevariation. A study of ten pairs of organic andconventional coffee farmers in Costa Rica found onaverage lower coffee yields, higher variableproduction costs and lower net income for theorganic farmers. However, there was large variationbetween the pairs and three of the organic farmshad higher net income than their conventionalcounterparts.102

Smallholder coffee farmers in Huehuetenango, oneof the poorest areas of Guatemala, experiencedyield increases of 38-67% in five years, from 0.86 to1.40 tonnes per hectare, after converting to organic.Other coffee farmers shifting to organic inGuatemala had usually experienced reductions inyield. The difference in this case reflected lowinputs and low yields before conversion as well asbetter shade and application of organic fertilisersand soil conservation measures.103 Production costsincreased because of the need for more labour butafter initial quality problems, prices increased by25%. Average family income increased from US$1,250 per year to US$ 1,970 per year.104

A study on shade coffee in El Salvador105 showed thatgrowers of Rainforest Alliance certified coffee weredisappointed with the small volume of salesachieved and the low premiums, and were regrettingthat they did not also seek organic certification fortheir coffee. Small-scale coffee growers in anotherRainforest Alliance certified area in El Triunfo inChiapas, Mexico, received more substantialpremiums but this was primarily because they werealso organic certified. A recent Oxfam study of thecoffee sector in Central America and Peru states thatsmall-scale farmers stress the need to becompensated for added cost of compliance withsustainability certification programmes.106

Multiple certification schemesThe proliferation of certification schemes for coffeeleading to packages having two or even threedifferent sustainability labels, coupled withcompanies’ own claims about their coffee products,has led to fears about consumer confusion andreduced credibility. Giovannucci and Koekkoek107 intheir survey of sustainable coffee expressed the viewthat this could ultimately undermine the marketprospects for certified coffee.

Certification of mainstreamroasters – moving beyond nichemarkets?

The two years 2003-05 have seen major changes inthe certified coffee market as mainstream coffeeroasters have started to take an interest incertification. As mentioned previously, all of the bigfour have started to certify a small proportion oftheir production under more than one scheme.Procter and Gamble, Sara Lee and Nestlé areinvolved in Fairtrade certification, Sara Lee has apartnership with Utz Kapeh, while Kraft is workingwith the Rainforest Alliance.

While some have welcomed these developments as asign of mainstreaming of certification others haveraised concerns about the motives of the companiesand the impacts on other fair trade and sustainabilitycoffee enterprises. Ransom108 says of Nestlé: ‘Nowwith its very own brand, it is at liberty to undercutevery other “Fairtrade” brand, not least on price andput them out of business. For every extra jar it sells,

102 Dankers, C, 2003103 Dankers, 2003, citing Damiani, O, 2002a; Cifuentes, I, undated104 Ibid. 105 Pagiola, S, and Ruthenberg, IM, 2002106 Daniels, S, and Petchers, S, 2005

107 Giovannucci,D, and Koekkoek, FJ, 2005108 Ransom, D, New Internationalist, 2005109 Carter, M, 2005110 http://www.babymilkaction.org/press/press6oct05.html

Social project at Ipemena Coffees, Minas Gerais, Brazil(see page 50)

From bean to cup

30

many more will doubtless be lost to fair trade as awhole’. The UK’s Fairtrade Foundation believes thatthis new product will help to expand the sector bybringing new customers in rather than takingcustomers away from existing independent suppliersof Fairtrade coffee products such as Traidcraft andCafé Direct.109

The Baby Milk Action Group emphasises the smallamounts of coffee involved in Nestlé’s recent venturesuggesting that it is a token gesture to gain the respectof NGOs and divert attention away from its otherbusiness activities such as baby milk.110 The FairtradeFoundation emphasises the distinction betweencertifying a product and endorsing a company. Although this is a case of mainstream companiesgetting involved, there is little indication that theysee certified products as anything other than a nicheproduct within their portfolio of brands. WhileKraft’s efforts are partly aimed at the mainstreammarket, the quantities involved are small. The NestléPartners’ Blend is striking for its cardboard cylinderpackaging, totally distinct from the glass jars inwhich its range of instant coffee products havetraditionally been packaged, and for the photographof the Salvadorian farmer and family on the frontunder the message ‘Coffee that helps farmers, theircommunities and the environment’. It is clearlybeing targeted at a different set of consumers fromthose that buy Nestlé’s more traditional coffeeproducts.

Rainforest Alliance Certificate withmap showing areas under enviromentalcontrol, Minas Gerais, Brazil

Impacts of certification on coffee growing areas

31

Brazil’s experience with coffeecertification111

Background to coffee productionBrazil is the largest producer of coffee in the world(38 million bags in 2004) and the second largestconsumer (15.5 million bags in 2004). Coffee was formany years the country’s major export but in recentyears has lost importance falling from 60% of exportsin 1962 to 2.8% in 2000. Nevertheless, coffee is stillvery important for rural livelihoods: it is producedby 370,000 rural properties in Brazil, 25% of themfamily farms.112 It generates, directly and indirectly,around 8.4 million jobs.

In addition to the coffee farms, there are 11 instantcoffee firms, 77 co-operatives and 166 exportingcompanies. In the State of Sao Paulo, alone there are250 roasters, mostly micro and small familyenterprises. Coffee is mainly exported as green beansbut there are also small volumes of roasted andinstant coffee, corresponding to less than 1% of thevalue of total coffee exports from Brazil. The mainexport markets for green coffee from Brazil areGermany, US, Italy and Japan. Denmark and Finlandare of lesser importance as export destinations butare still included in the top 15 markets.

The area planted with coffee in Brazil has beendeclining but production has been increasing,indicating increasing yields resulting from large-scale production and use of modern techniques.

Coffee is produced in 17 states of Brazil but themajor producer is the state of Minas Gerais, whichcorresponds to nearly 50% of total production in

2004/5 and 60% of total arabica production. SãoPaulo state is the second largest producer of arabicacoffee. Together 80% of the certified coffee producersin Brazil are located in these two states. For thisreason the survey carried out for this study wasconcentrated in these two states.

The surveyThe survey was of certified and conventionalcoffee producers in the Cerrado, south and centre-south of Minas Gerais and the Mogiana region ofSão Paulo state. Interviews involving visits to theselected farms were carried out in August 2005.Twenty-eight certified farms belonging to 20companies or farmers were covered by the survey.This included two of the largest coffee estates inBrazil, Ipanema and Monte Alegre, and at theother end of the spectrum, six smallholders fromthe Fairtrade certified Cooperativa dosAgricultores Familiares de Poço Fundo. Inaddition, two farms from the Cerrado region ofMinas Gerais were randomly selected as well asseven medium-sized coffee farms from all threeregions of the state. Three coffee farms from SaoPaulo state were also randomly selected. Thecertification schemes involved were Fairtrade,organic, Utz Kapeh and Rainforest Alliance withsome of the farms having certification from morethan one scheme. Ten conventional coffeeproducers (seven in Minas Gerais and three in SãoPaulo) were also surveyed.

In addition to the survey, visits were madesubsequently in October 2005 by the whole projectteam to three of the certified farms (Ipanema, SeteCachoeiras and the Poço Fundo association) and oneof the conventional producers (Fazenda São Gabriel).

Chapter 4

Impacts of certification on coffeegrowing areas

111 Except where otherwise stated, this section draws from thereport prepared by Flavia Bliska and Sergio Pereira of the Centrode Café Alcides Carvalho, Instituto Agronômico, Secretaria deAgricultura e Abastecimento do Estado de São Paulo, October2005

112 Bliska, F, and Pereira, S, 2005, citing IBGE, 2004

From bean to cup

32

Status of certification in BrazilCoffee growers, large estates particularly, have overthe last few years looked for ways of differentiatingthemselves through quality certification ISO 14001and ISO 9001 and latterly through certificationrelating to social and environmental attributes –environmental protection, food security andavoidance of child labour.

Organic certification is the most well establishedscheme in Brazil, having started in 1992 and grown torepresent 0.25% of production in 2003 and 250,000bags in 2004.113 Since 1998 there has been anassociation of organic coffee producers in Brazil(ACOB) in the South Minas region. Most of theorganic coffee goes to the Japanese market as thispays the highest premium but some goes to the USand Europe.114

Fairtrade is less established and so far only sixgroups of producers have been certified.115 Fairtradewas hampered in Brazil by a perception that Brazilhad only large coffee estates and did not have smallgrowers.116 However, it is estimated that some 90% ofBrazilian coffee producers have properties with lessthan 100 hectares and that 36% of the coffeeproduced in Brazil comes from properties of up to 10hectares.117

A recent development is the launch of a BrazilianFairtrade certified French Roast coffee in the US bythe Brazilian roaster company, Café Bom Dia. This isthe first company to be licensed by Transfair USA tosell Fairtrade certified coffee, roasted in theproducing country rather than the consumingcountry. The coffee will be sold by Sam’s Club, a cashand carry division of Wal-Mart, which serves smallbusiness owners and operators.118

The Rainforest Alliance scheme started in Brazil in2002.119 So far the scheme has attracted six large coffeegrowers with multiple farms. Fifteen certificates havebeen issued, for 16 farms, covering a total of 8,196hectares of coffee. Four chain of custody certificateshave also been issued to the following companies:Ituano, Bom Dia, Natura and Croda. While theRainforest Alliance scheme started off elsewhere inLatin America as a shade coffee scheme, this wasjudged inappropriate for Brazil where sun coffeespredominate. The emphasis of the scheme is therefore

on restoring natural ecosystems and maintainingnatural forest surrounding the coffee plantation, aswell as preventing conversion of forest.

The first Utz Kapeh certification in Brazil was in 2002and since then it has expanded rapidly. As ofNovember 2005, 54 farms are certified and 30 areregistered and working on becoming certified. Thecertified farms cover an area of 81,400 hectares ofwhich 27, 700 are planted with coffee.120 Twelveexporters, three traders and two roasters (Café BomDia and Astro Café) are registered as buyers in Brazilof Utz Kapeh certified coffee.121

There are no official figures on the exports of certifiedcoffee from Brazil but five key informants engaged inroasting and trading and also with an involvement incertification initiatives concur that around 95% isexported. Organic coffee is so far the only type ofcertified coffee that has any presence in the domesticmarket.

The impacts of coffee certification

Financial benefits from certificationEvidence from the Brazil survey indicates that coffeegrowers have benefited financially from certification.All the certified farmers interviewed responded thatrevenues had increased as a result of certification andaccess to new export markets had been facilitated.This applies across all the major certification schemesand for both the large companies and the smallfamily farmers interviewed in the survey. It isparticularly striking for the members of the Fairtradeco-operative, Poço Fundo association. All the certifiedfarmers stressed that the key factor was the quality oftheir coffee and that negotiating skills and marketinformation were essential to take full advantage ofcertification. They were also unanimous in statingthat the main motivation for seeking certification wasto improve market access.

Fairtrade certification has made a major difference formembers of the Poço Fundo association. They havereceived higher and more stable prices for theircoffee. More importantly, they have been able toinvest in processing equipment for the coffee as wellas for social projects benefiting the community, inparticular a computer training facility.

113 de Souza, M, 2004114 Giovannucci and Koekkoek 2003115 FLO, personal communication, 2005116 Luis Adauto Oliveira, personal communication, 2005117 Observatorio Social, 2004118 OCA, 2005

119 All the information in this paragraph is from a presentation byLuis Guedes Pinto, Director, Imaflora at IDEC, São Paulo,14/10/05. The data refers to 1/10/05.120 David Rosenberg, personal communication, 2005121 www.utzkapeh.org, 16/11/05


33

Organic certification in the time of low coffee pricesmade a marked difference to revenues for the coffeegrowers concerned. According to Ivan Caixeta, ex-President of ACOB, when prices of conventionalcoffee were US$ 60 per bag, organic coffee wasfetching US$ 160-180. As conventional prices haverisen the price differential between conventional andorganic coffee has been reduced. This has promptedas many as 30 organic producers to revert toconventional production. There are also some organicfarmers who are exporting their high quality coffee(screen 14 upwards122) and sending their lowerquality coffee for processing into organic 100%arabica instant coffee, which is mostly exported toJapan.123

Utz Kapeh certification has yielded premiums but forIpanema at least these have gone down from US$ 7cents per bag to 3 cents. More important for Ipanemahas been the access that Utz Kapeh certification hasfacilitated with the buyers to develop more stableand closer relationships. It has thus been able toagree a fixed price for its coffee with the Norwegiancompany Friele until 2011.124 It also has a similarfixed price arrangement until 2011 with Starbucks.

Premiums achieved under the Rainforest Alliancescheme range from 5 to 15 cents per lb of coffee,bringing the price for Brazilian coffee up to the samelevel as the New York Board of Trade.125

Non-financial benefits from certificationNone of the certified producers interviewedindicated that they had received any support in theform of training or technical assistance as a result ofcertification, whether from government or an NGO.The family farmers in the Poço Fundo associationwere already organised as a co-operative before theycontemplated certification, and had developed theirown organic production techniques without externaltechnical assistance.126 The medium and largeproducers have, as a result of certification, investedin training for their workers on, for example, use ofsafety equipment, use of agricultural machinery, firecontrol and environmental education. They have alsocontracted consultants to develop projects andtraining without any financial support.

However, it appears that this is changing. The smallproducer groups that are in the process of certifying

with Utz Kapeh are receiving some technical supportfrom regional co-operatives interested in buyingcertified coffee from small producers.127 TheRainforest Alliance is looking for ways to promotethe participation of small producers in certification(see section on Barriers to certification on page 35 forfurther discussion).

Costs of certificationThe direct costs of certification vary according to thecertification scheme. The Rainforest Alliance schemeis reported to be the most expensive. The sevenconventional producers interviewed all indicatedthat the costs of certification, whatever the scheme,would be very high for small producers.

The indirect costs of certification depend on thenature of the certification scheme and the existingpractices of the farms. The survey found that insome cases the coffee growers involved werealready close to meeting the requirements of thescheme and so indirect costs were notconsiderable. In particular, two farms that werealready in compliance with ISO quality andenvironmental management requirements hadvirtually no cost involved in meeting therequirements of the Utz Kapeh scheme. The maincosts were the direct costs of the certificationschemes. Five farmers pointed out thatcertification had prompted a rationalisation oftheir production systems leading to cost-savingsand making them more competitive.

The Rainforest Alliance is more costly for producersthan Utz Kapeh because its environmental and socialrequirements are more stringent, particularly withregards to the requirement to restore nativeecosystems. The latter requirement sets it apart alsofrom organic certification and Fairtrade. Brazilianlaw requires that in areas previously covered by theAtlantic forest , 20% of the area of each propertyshould be kept under forest cover as legal reserves.128

It is also a requirement that riparian areas and areascritical for water resources should be permanentlypreserved. Both requirements have proved hard toenforce. The Rainforest Alliance scheme requires thatnot only should the law be respected, but thatadditional areas of land be restored to nativeecosystems in order to provide ecological corridorsfor wildlife to pass.

122 This refers to the size of the holes in a sieve used for gradingthe coffee123 Ivan Caixeta, personal communication, 2005124 Washington Rodrigues, personal communication, 2005

125 Luis Guedes Pinto, Director, Imaflora, presentation, 14/10/05126 Luis Adauto Oliveira, personal communication, 2005127 E Sampaio, personal communication, 2005128 Young, CEF, 2002

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The costs of establishing and maintaining thesereserves can be very high. Two companies with thistype of certification estimate costs ranging from US$10,000 to US$ 50,000 to cover consultancy costs,seedlings, planting, management and theopportunity cost of the land in terms of foregoneland use. In the case of the Sete Cachoeiras farm, theland area occupied by natural forest and other nativevegetation equals as much as half of the area plantedwith coffee.129 However, the Rainforest Alliancescheme is not as demanding as organic certificationin other aspects and permits the use of agro-chemicals if well managed and if there is acommitment to reducing their use.130 It also does notinsist on contour planting. This facilitates the use ofmachines for harvesting and other activities.131

For organic certified producers in Brazil, there isconsiderable variation depending on thecircumstances of the farmers, the other activities onthe farm and the length of time as an organic farmer.Where coffee farming is combined with livestockfarming, the availability of manure makes thesubstitution of chemical fertilisers by organic moreviable. While there may be initial reduction in yieldsin the transition to organic because of insufficientminerals, this improves over time as minerals buildup in the soil.132

This explains why there have been varied responsesto the recent narrowing of the price differentialbetween organic and conventional coffee. It is theproducers who converted more recently to organicwho have now reverted back to conventional inorder to increase their yields. The price differentialbetween organic and conventional was not sufficientto offset the costs of reduced yield. This applies alsoto some Fairtrade producers who, after a period ofcombined Fairtrade and organic certification, havereverted to single certification, as Fairtrade implieslittle indirect cost at the level of the producer. Moreestablished organic producers who have higheryields have stayed with their organic status.

Impacts on farm/estate workers andcommunitiesLarge companies are taking measures to meet thesocial requirements of certification schemes andimprove basic working conditions for theiremployees. Nine of the medium and large farmers

interviewed indicated that as a result of these goodworking conditions they experienced no shortage ofworkers interested in working for them. The majorbenefits indicated by six medium and large farms arejob security, medical and hospital treatment with theon-site presence of a nurse and social worker. Sevenof the certified farms, but also one conventionalfarm, claim to provide housing, basic foodprovisions, training for employees and their families,vegetable gardens, meals and canteens, drinkingwater and toilets.

There have been improvements in health and safetyalso as a result of certification with workers requiredto use and being provided with protective clothingand equipment when applying agrochemicals. Butaccording to nine of the medium and large farmssurveyed, there has been some resistance among theworkers to using this protection equipment becauseof problems of heat and discomfort.

It could be argued that these companies are simplymeeting the requirements of the law. Brazilian legalrequirements are strict although law enforcement islax. Therefore, additional incentives to meet legalrequirements are useful.

Impact on local environment In order to meet the requirements of certification,certified coffee farmers have improved the treatmentand recycling of water used for the processing ofcoffee. This, together with the reduced use of agro-chemicals, is the most noticeable impact so far. Theprojects restoring native vegetation of the RainforestAlliance certified estates are significant but too recentto have any major impact as yet. There is anecdotalevidence however, that armadillos are returning tothe area and that there is greater availability of wildplants traditionally used for food by the localpopulation.

There have also been indirect effects on theenvironmental performance of other farmers in theregions. Certified coffee farmers in Brazil claim thatthey are influencing the environmental awarenessand performance of neighbouring coffee farmers.They have served as a model for other farmers in theregion and stimulated other coffee growers to seekcertification. Farmers in the Poço Fundo associationand six of the certified medium and large farmers

129 www.7cachoeiras.com.br130 Luis Guedes Pinto, Director, Imaflora, presentation 14/10/05

131Renato Farhat Brito, personal communication, 2005 132 EPAMIG, 2002


35

interviewed pointed to the effect of theirenvironmental practices on their neighbours. Afterobserving the certified farmers, neighbouringfarmers have started to recycle their waste, havestopped polluting streams and cutting down trees.They have also improved working conditions fortheir employees.

Barriers to certification for coffeegrowersThe direct costs of certification appear to be a barrierfor small producers. All the conventional farmersinterviewed in the survey considered that the costs ofcertification would be a major difficulty for smallproducers. They did not distinguish between schemesin their response but it would seem that Fairtrade isan exception. The costs are considerably lower forFairtrade – US$ 500 a year for the Poço Fundoassociation – which spread among a group of farmersis fairly low. The barrier in this case is not so muchcost but achieving the level of collective organisationrequired to access the Fairtrade scheme as it does notwork with individual farmers.

The costs of annual audits for the Rainforest Alliancescheme vary between US$ 1,000 and US$ 5,000 in thecase of Ipanema. The organisation acknowledges thatthis would be too much for some small producers.Certifications under the Utz Kapeh scheme and theRainforest Alliance scheme have so far been issuedmainly for large properties producing more than10,000 bags (600 tonnes) per year. Of the 54 farmscertified under Utz Kapeh only three are less than 50 hectares in size.133

But both schemes are striving to work with smallfarms and co-operatives. Utz Kapeh, which likeRainforest Alliance has started with the largestcompanies, is now in the process of certifying severalco-operatives of farmers. Of the 30 farms currentlyworking on Utz Kapeh certification, as well as twoindividual farms with less than 50 hectares, there arethree producer groups all with numerous farmerswith less than 50 hectares.134

The Rainforest Alliance through its local partnerorganisation, Imaflora, is working to overcome thesebarriers by providing information about certification,organising capacity-building workshops andsubsidising the costs of certification for groups of

small farmers. It has set up a fund for this purposewhich is made up of a proportion of the revenuesfrom the certification fees charged to large farms anda grant from the European Union.135 It is alsoworking together with the Brazilian organiccertifying organisation, Instituto Biodinamico, ondeveloping a joint audit to reduce costs forproducers of double organic and Rainforest Alliancecertification.

Vietnam’s experience

Problems of conventional coffee In 1980, Vietnam had about 22,500 hectares plantedwith coffee of which only half was productive and itstotal production was only 8,400 tonnes. The 1990ssaw phenomenal growth in the area planted withcoffee, export driven by the high coffee prices thatprevailed until 2000, making Vietnam the world’ssecond largest producer country after Brazil.

In 1995 the unit price of exports peaked at US$ 2,394per tonne, but by 2001 when production hadincreased to 900,000 tonnes, the unit price of exportshad dropped sharply to US$ 400 per tonne.Production and export, as well as the coffee plantedarea, all fell for the next two years and onlyrecovered in 2004. However, the crop for 2005/06 isforecast to be 10-10.5 million bags (about 600,000tonnes).136 The policy of the Vietnamese coffeeindustry is now to reduce coffee production and areaplanted and concentrate on quality.137

As there were no effective measures to control leafrust in the 1980s, the Vietnamese coffee industrydeveloped on the basis of robusta, which was wellsuited to the hot, and humid weather conditions ofsouthern Vietnam. A highly mechanised andintensive approach was developed with high densityof planting, high volume watering, heavy use ofmineral fertilisers and no use of shade trees. As aresult high yields were obtained: 3-4 tonnes perhectare and in some areas as high as 8-9 tonnes perhectare. Steps are now being taken to promote theproduction of arabica coffee in the north of Vietnamand in high altitude areas in the central highlandsand in the south. Bourbon coffee, which is of highquality, is being grown in these areas.

133 David Rosenberg, personal communication, 2005134 David Rosenberg, personal communication, 2005135 Luis Guedes Pinto, Director, Imaflora, presentation, 14/10/05

136 Doan Trieu Nhan, 2005137 Ibid.

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36

Coffee is an important export crop for Vietnam,second only to rice. About 95% of coffee produced isexported to 50 countries, the main markets being theUS, Germany and Japan. The domestic market isvery small as coffee is consumed only by middle andhigh-income people in urban areas. The remaining70% of the population, living mainly in rural areas,rarely drinks coffee.

The coffee industry currently employs over 600,000people directly, increasing to 700,000-800,000 in theharvest season, and nearly 200,000 people indirectly,.corresponding to about 3% of agriculturalemployment. Assuming an average household sizeof five, this means that 2.5 million people in ruralareas were dependent for their livelihood on coffee.Of these coffee-producing households, 46% wereliving below the official poverty line and 30% ofthem were ethnic minorities. The fall in prices after2000 had serious consequences for these families andsome of them were forced to abandon coffee forother crops.

The effect of the price decline was explained in starkterms in Vietnam’s response to the ICO’s request forinformation on the impact of the coffee crisis: whileone kilo of coffee in the mid-1990s exchanged for fivebags of rice, by 2002 this ratio had dropped to one-

to-one.138 The problem is not due to high costs orprofits in Vietnam because the coffee producers get ahigh percentage of the export price, nearly 90% in2000139 and an average of 95% in 2005, according tothe producers, millers and export companiesinterviewed for this report. The problem is that theexport price is itself so low.

About 70% of the coffee planted area belongs tosmall farmers with 0.1-10 hectares per household(but very few have as much as 10 hectares). Thereare also a number of state-owned farms with areasranging from 400-1,500 hectares. Yields on thesmallholder coffee plots, with many achieving 4-6tonnes per hectare, have typically been higher thanon the state-owned farms where yields have been2.5-3 tonnes per hectare.

Despite high yields, smallholder farmers haveproblems of quality in processing. In somemountainous areas, and particularly in ethnicminority areas, there is a lack of cement orbrickyards for drying coffee, so it is difficult toprevent coffee mould and Ochratoxin Acontamination. These small producers cannot affordto buy a milling machine and face problems ingetting their coffee processed. They therefore have tosell their coffee unprocessed to intermediaries.

01980

Total production (tonnes) Export (tonnes)

1985 1990 1995 2001 2004

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

Chart 1: Coffee production and export in Vietnam 1980-2004

138 International Coffee Organization, 2003139 Le Dhin Sohn, FAO 2000


37

Extension services for smallholder coffee producersparticularly in mountainous and ethnic minorityareas are very limited – these producers rely onextension staff from district and commune levelswho have few qualifications. So concepts of goodagricultural practice and good manufacturingpractice have not been widely disseminated to theseremote producers.

The intensive nature of Vietnam’s coffee productionhas also been problematic from the environmentalviewpoint. Large amounts of water are needed forirrigating coffee, putting pressure on groundwaterresources in coffee areas. In the last drought in 2003,some provinces had to stop producing rice in orderto ensure that the coffee had sufficient water. YetVICOFA, the Vietnam coffee producers association,estimates that the volume of irrigation water neededfor coffee could be reduced by 40% in Dak Lakprovince without influencing yield and production.The development of coffee plantations requiredextensive clear cutting of forests. Soil erosion hasbeen caused by practices of not planting on terracesor contour lines. Excessive use of mineral fertilisers,urea in particular, has also contributed to soildegradation while some coffee areas have sufferedpollution because of poor pesticide management.

It is acknowledged by VICOFA that the low qualityof Vietnamese coffee remains a big problem.

Current status of certification in VietnamThe only certification scheme that has any presencein Vietnam is Utz Kapeh which has very recentlyopened an office in Hanoi. So far, six state-ownedcompanies have been certified by Utz Kapeh, five in2002 and one in 2003. In 2004, some 4,000 tonnes ofgreen coffee was exported from Vietnam as UtzKapeh certified. As of December 2005, in addition tothe state farms, projects to pursue certification in2006 had been initiated by two co-operative groupsand three farms. It is predicted by the Utz Kapehrepresentative that because of local endorsement byVINACAFE140 and VICOFA, the amount certified willincrease substantially in coming years.141

One reason for the absence of the other certificationschemes is probably the preponderance of robustacoffee in Vietnam, coupled with its low quality.Certification schemes until recently have targeted a

niche market interested in arabica coffee, of a highquality. Environmental practices in the industry arevery poor so the industry is a long way frommeeting the requirements of organic or RainforestAlliance certification. For most smallholder farmers,struggling to make a livelihood, environmentalprotection is not a priority. There are also problemsof obtaining financing to invest in improvingproduction practices and processing methods.

With its preponderance of small coffee farmers,Vietnam should be ideally suited for Fairtradecertification but the low quality of its coffee worksagainst this. Another serious obstacle is that there islittle tradition of smallholder democratically runcoffee co-operatives and this is a pre-requisite forFairtrade certification. Nor are there more than a fewof the institutional top-down type of co-operativesstill existing in the coffee sector as these are nolonger supported and subsidised by the government.There has been little government-sponsoredsustainability initiatives in Vietnam.

According to David Rosenberg,142 Utz Kapeh’ssuccess so far is due to efforts by exporters tomobilise farms to participate in the programme. UtzKapeh has been working with CafeControl ascertifier since 2002 and significant resources havebeen invested by Utz Kapeh and the Coffee SupportNetwork to train both CafeControl inspectors andagronomists from the participating farms. That initialknowhow is being spread to other farms andagronomists. There have been three pilotsustainability projects in the form of public-privatepartnerships by Sara Lee, Kraft, and Nestlé, togetherwith Neumann Gruppe’s consulting arm EDE anddonor GTZ. One of these projects led to Utz Kapehcertification.

Interviews conducted by VICOFA with three of theUtz Kapeh certified state-owned companies revealthat the costs of meeting the requirements of thiscertification scheme were estimated at US$ 40 pertonne of green coffee. These costs resulted fromchanging farm practice and introducing socialprojects such as schools for workers’ children.Higher prices were received for the coffee producedas a result of Utz Kapeh certification but only anincrease of US$ 10-20 per tonne, which was notsufficient to offset the increased costs. There was no

140 Vietnam National Coffee Corporation, a state-owned companythat has control over 20% of the country’s coffee

141 David Rosenberg, personal communication, December 2005142 David Rosenberg, personal communication, December 2005

From bean to cup

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improvement to financing terms either. Thus so far,there is little apparent financial incentive toproducers to opt for certified production.

Yet it seems that interest is growing in Utz Kapeh.According to VICOFA this is because of thepotential it brings for market access and more stablecontracts. Utz Kapeh representatives believe thatproducers are interested in Utz Kapeh because theysee opportunities to improve production processesand reduce costs. They argue that in a country likeVietnam, with relatively high inputs and a newcoffee culture, producers welcome the opportunity torationalise inputs and improve management skills.143

VICOFA believes that organic certification could bepromising for Vietnam. As Vietnam has tropicalclimate with high temperature and high rainfall, ithas good conditions for combining coffee withlivestock to provide organic material to provide asource of manure for mulching of coffee trees. It isnecessary to strengthen the roles of VINASTAS andVICOFA in providing technical assistance andpromoting the advantages of using high qualitycertified coffee and to create some demonstrationmodels of organic coffee, shade coffee and highaltitude coffee. VICOFA is promoting a simpleformula in its communications to promote bettermanagement practices in coffee :three terms ofdecrease, three terms of increase and one prohibitedterm (see Box 5).

For certification to play a more important role inVietnam, the quality of the coffee produced has toimprove. The experience of certified producers inBrazil shows that certification was insufficient formarket benefits and that achieving quality standardswas also necessary. The other lesson to be taken from Brazil is the potential role that smallholder co-operatives could play in promoting betterenvironmental practices in coffee production andensuring a higher return for the growers.

143 David Rosenberg, personal communication, December 2005

Decrease • mineral fertiliser• pesticide• water use for coffee irrigation

Increase• shade trees• organic fertiliser• pruning

Prohibit• Picking green, over-ripe or dry falling cherries

Box 5: Improving Management Practices

Source: VICOFA


39

Overview of the markets inconsumer countries

This section examines the status of and prospects forconsumption of certified coffee in some keyimporting countries, Denmark, Finland, Portugaland US, which source their coffee from Brazil andVietnam. While Brazil is a major consumer of coffee,the market for certified coffee is tiny and limited tohigh-income sections of the population. The majorimpact on the coffee commodity chain in Brazil ismore likely to come from markets for certified coffeein countries importing from Brazil. For this reason,the market for certified coffee in Brazil is notconsidered further in this report.

The US is the world’s largest consumer of coffee inabsolute terms, but at 4.26 kilos per year its percapita consumption is low relative to Denmark (9.43 kilos) and Finland (11.99 kilos), the world’shighest consumer in per capita terms, which havemore of a coffee-drinking culture. Portugal hassimilar per capita consumption to the US at 4.4 kilosper year.145

In both the US and the two Scandinavian countries,there has been a growth in the number of caféssuggesting a booming market for coffee, but whileconsumption continues to grow in the US (by 7.4%over the period 2001-04) it appears to be stagnatingin Denmark and Portugal. In particular, in Denmark,there is a marked difference in consumption patternsbetween the older generation who are heavy coffeedrinkers and the younger generation who prefer softdrinks. In Denmark, whereas 85% of the populationover 50 years-of-age drinks coffee, this percentagedrops to 50% for those under 30.146

Brazil is a major source of coffee imports for all fourcountries and Vietnam is significant for all exceptFinland. There is also a considerable amount of

re-export of roasted and ground coffee, for exampleto Finland, from other European countries(Netherlands) and from Finland to Russia and Baltic countries.

In all four countries, the importing and roasting ofcoffee is highly concentrated in a small number ofcompanies. In Finland, particularly, one company,Paulig (a Finnish company established over acentury ago) has 60% of the market with its ownbrand but also roasts another 15% for othercompanies. The other main Finnish company, Meira,which has 20% of the market, is owned by the Italiancompany, Segafredo. In Denmark, twomultinationals, Sara Lee and Kraft, have high sharesof the market, 31% and 27% respectively, but twoDanish companies have about 30% between them. The US market is dominated by Sara Lee, Kraft andProcter and Gamble (and Nestlé), which betweenthem import and roast nearly half of the US’s coffee.In Portugal, Nestlé controls 33% of the market butthe remaining 70% is covered by around 70 roasters,some operating at a very small local scale.147

In spite of the coffee house boom and emergence ofcoffee as a life-style product, coffee in Denmark andFinland has conservative connotations. The Danestend to be conservative in their choice of coffee,sticking with specific brands. In Finland, some of thepopular brands, such as Presidentti andKultakatriina introduced in 1937, have not changedfor decades, nor has their packaging. Coffee inFinland is associated with tradition and nostalgiaand to some extent with the church. There is atraditional Finnish taste coffee which is light roastedarabica mixed with some mocca (see Box 6 on page40).

144 This section is based on reports prepared by Maria de FatimaFerreira of DECO, Portugal; Johanna Parikka Altenstedt ofKuluttajat-Konsumenterna, Finland; Torsten Raagaard of theDanish Consumer Council; and Kristi Wiedemann of theConsumers Union, US

145 International Trade Centre, Geneva, 2005146 DIPO – The Danish Import Promotion Office for Products fromDeveloping Countries, 2003147 International Trade Centre, Geneva, 2005

Chapter 5

Markets for certified coffee144

Status of certified coffee and outlook

In the US, consumption of certified sustainable coffeeis growing in volume and taking up an increasingshare of the specialty coffee market. Fairtrade certifiedcoffee is the fastest growing segment of the USspecialty coffee market and in 2003, US coffee roastersselling Fairtrade coffee for at least two years saw anaverage of 125% annual growth148 albeit from a smallbase. This rapid growth continued in 2004 with salesincreasing by 84% from the previous year.149 There arenow about 40,000 retail outlets for Fairtrade products.More significantly, Fairtrade coffees are now availableat mainstream supermarkets nationwide.150 Organiccoffee and tea sales are also growing from US$ 65million to US$ 124 million in 2003.151 There are also

increasing sales of Rainforest Alliance, boosted by theagreement with Kraft, as well as Bird Friendly coffee.The four major coffee roasters (Sara Lee, Nestle,Procter and Gamble and Kraft/Philip Morris) havestarted to use certified sustainable coffee for some oftheir products but these are not yet sold in USsupermarkets but in online sales.

In Finland, Fairtrade and Fairtrade/organic coffeehave been on sale since 1999 and currently make uponly about 0.3% of the market with sales of around120 tonnes.152 After a phase of very slow growth therehas been some marked change – sales have beengrowing by 8% between 2003 and 2004 and 3%between 2002 and 2003. This recent growth is mainlybecause of the growth in institutional purchases ofFairtrade coffee which has had a knock-on effect of

From bean to cup

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Juhlamokka (Celebration Mocca) is produced byPaulig and has 45% of the market. The brand wasintroduced in 1929. The coffee contains Santosbeans from Brazil but the proportion is not known.The packaging looks much like it did 75 years ago.

Kulta Katriina (Golden Catherine) by Meira has 14%of the market and is the second most popular coffeebrand in Finland. It was introduced in 1937 and hasretained the same image.

Presidentti is another Paulig brand with 10%market share. This coffee has been on the market inthe similar package for 75 years.

The image of coffee is associated with:• celebration• exclusivity• tradition and nostalgia• values that do not change in the changing world.

Coffee consumption wascontrolled by rationcards until 1954 and as aresult coffee became avery popular symbol forthe rebuilding ofFinland after the war.The coffee labels wereoften associated withglory and the nation, thepresident, the goldenmocca and celebrations.These coffee labels arestill the most popularand the packages have changed little – for example,no coffee package shows a coffee mug, althoughmost coffee is served in mugs, preferring to retainimages of tiny coffee cups and small plates. Thecoffee business has managed to retain a sense ofnostalgia over coffee drinking.

One way to promote coffee has been the extremelypopular competitions to become ‘Coffee girls’. ThePaulig company’s ‘Paula’ girls travel the country innational dress to promote coffee. There are stillsome Paula girls around – but they not as famousas they once were.

Box 6: Finnish coffee tradition

148 Transfair USA website149 Calculated from FLO sales figures for 2003 and 2004

150 Transfair USA website151 SCAA, 2004

Paula girl 2003, a studentin communications

introducing consumers to this type of coffee in theirworkplace, which leads them to buy it for their homeconsumption.153

Other types of certification are not present in theFinnish market apart from some organic coffeesalso introduced to Finland in 1999. Fairtrade coffeeis available in the mainstream outlets as well asthe specialist sector including the developmentorganisation shops, Africafe and church shops,which together correspond to about a fifth ofFairtrade coffee sales in Finland but also do someexport, eg Finnish church Fairtrade organic coffeeis exported to Sweden and sold in the Coop chain.Today, there are about 100 companies, coffee shops and institutions selling Fairtrade coffee inFinland.154

Denmark, which has the second highest per capitaconsumption of Fairtrade coffee after theNetherlands, presents a contrast to Finland as salesof Fair Trade/organic coffee have stabilised afterseveral years of growth. Fairtrade coffee and organiccoffee constitute about 2-3% of all coffee sold on theDanish market and this percentage has been fairlystable in the five years 2000-05. Certified coffees canbe found in virtually every supermarket chain aswell as smaller grocers and convenience stores like 7-Eleven. There are now 20-25 labelled Fairtradecoffee products and seven companies registered totrade Fairtrade coffee.155 A high proportion – 49% in2004156 – of the Fairtrade coffee sold in Denmark isalso organic.

However, there was a decline in sales of FairtradeMax Havelaar certified coffees after a peak of 742tonnes in 2000. To address this, Max Havelaar set upcoffee clubs and a billboard campaign that featuredwell-known people on with opposing views sharinga cup of coffee.157 The organisation expects sales togrow again in the next couple of years.158 Organiccoffee sales in Denmark were 1,448 tonnes in 2001and 1,320 tonnes in 2002/3.

In Portugal certification of coffee is very recent andso far Fairtrade is the only certification scheme withany presence. However, this is sold only in specialistoutlets such as ‘world shops’, (there are 11 in thecountry and being dependent on volunteers, their

opening times are restricted) and several privateshops selling organic products. Fairtrade coffee is notsold in supermarkets. There are no nationalimporters of Fairtrade products. Two Spanishimporters, IDEAS and Alternativa3, and one Italiancompany, Ctm-altromercato, sell their products inPortugal.

Barriers to increasing demand forcertified coffee

Price differentialsThe theory is that the price premium of certifiedcoffee, particularly for Fairtrade coffee, can act as aconstraint on demand. In practice, the variety ofconventional coffee brands and quality on offer andthe differences in prices, coupled with a lack ofinformation to consumers about the country of originand the quality, makes a like-for-like pricecomparison of certified coffee with conventionalcoffee quite difficult under ‘normal’ tradingconditions. Prices for both certified and conventionalcoffees vary considerably depending on the brandand how it is positioned, the nature of the outlet,supermarket or specialist, the country of origin,including whether it is known or not, and thequality. This can be seen from Table 3 on page 42,which shows prices for a range of roasted andground coffee products in Finland in summer 2005.

Almost all the ordinary coffee in Finland is a blendof Colombian coffee and Santos from Brazil but themixture varies and is not disclosed for commercialreasons.159 As the blend is a commercial secret, it isnot possible to make a value-for-money comparisonbetween certified coffees and conventional blendedcoffees based on quality. Even if the information onsources was provided, the consumer would notnecessarily be able to interpret and assess which isthe better deal. Ultimately, it is the taste of the coffeethat matters for the consumer and so a brand with afamiliar taste will be preferred.

However, price comparisons can become clear incases where supermarkets use conventional coffee asloss leaders to attract shoppers into the store. Thecoffee is sold on offer at low prices and this makesthe price differential with Fairtrade coffee more


41

152 Calculated from sales figures provided by Finnish Fair Trade153 Ann Hedman, Product Chief, Finnish Fair Trade, personalcommunication, 2005154 Ann Hedman, Product Chief, Finnish Fair Trade, personalcommunication, 2005155 Judith Kyst, personal communication, 2005

156 Calculated from FLO sales figures for 2003 and 2004157 Judith Kyst, personal communication, 2005158 Judith Kyst, personal communication, 2005159 Paula Suutarinen, Tuko Logistics, Finland, telephone interview,10/8/05

From bean to cup

42

Table 3: Prices of certified and conventional coffee products in Finland

Retailer/Importer

Kespro

Tuko Logistics

Pirkka

Stockmann

Porvoon Paahtimo

Mokkamestarit

Coffee brand

Menu OrganicMenu FairtradeMenu Original

Reilun KaupanFirst PriceJuhla MokkaEldorado moccaEmozioni arabicaEspresso originalParisien PauligOriginal GustavPauligSegafredoPaulig BrazilKulta Mokka

Reilun KaupanCosta Rica Paulig ColombiaRoberts

Arvid NordqvistOriginalCellini EspressoArabSegafredoLavazza

Coffee originalCoffee beansBlue Mountain

Fazenda Santa TerezinhaFazenda Bela VistaFazenda Cachoeira 100%Bourbon

Country of origin

ColombiaGuatemalaKenya

Not disclosedPeru plus othersBrazil plus othersEast Africa (Ethiopiaplus others)Not disclosedNot disclosedNot disclosedBrazil plus othersNot disclosedBrazilBrazil plus others

MexicoMexicoColombiaMexico and Peru

Not disclosed

Not disclosed

Not disclosedNot disclosed

BrazilPanamaJamaica

Brazil

Brazil

Brazil

Retailer priceeuro/kilo (June-Aug 2005)

7.887.884.35

16.484.667.385.18

19.4420.7620.7619.4816.207.345.78

9.8412.8818.4419.60

11

20

1416.80

33.5033.50

476.2

33

33

29.52

Certification

OrganicFairtradeConventional

Fairtrade organicConventionalConventionalConventionalConventionalConventionalConventionalConventionalConventionalConventionalConventional

Fairtrade organicOrganicOrganicFairtrade organic

Conventional

Conventional

ConventionalConventional

ConventionalConventionalConventional

Organic

Conventional

Conventional

Mainstream outlets

Specialty outlets


43

noticeable. This applies particularly to Denmark andFinland. Surveys conducted for the Max HavelaarFoundation in Denmark indicate that consumers arewilling to pay an extra price for certified Fairtradecoffee but this is not borne out in practice asconsumers tend to buy the coffees on special offer. ‘Ifconventional coffee is always on offer the price gap isvery big. This means that the skeptical consumerfeels laughed at because he has to pay so muchmore,’ says Mogens Werge, Director of Environment,Coop-Denmark.

Thus in Finland while double certified Fairtrade coffeenormally costs around 10 euros per kilo (see Table 3), apackage of Kulta Katriina costs about 9 euros per kilo when not on special offer. But inMarch 2005, a package of Kulta Katriina was onspecial offer at only 2 euros per kilo and special offersof 4-6 euros are not uncommon. With such offers, theFairtrade coffee looks expensive. The Fairtradeorganisations are not in a position to offer the sametype of promotional offers to the retail outlets.

Achieving traditional tasteIn Finland a survey made by Dagmar Inc in March2005 showed that 38% of consumers were ready tochange to Fairtrade coffee, 47% would considerchanging and only 15% said that they would notchange. This last group said that they were worriedabout the ‘developing country quality’ and that theypreferred ‘coffee from Finland’ implying that Fairtradeis associated with strong, strange and unknownqualities. This underlines the importance of brandingand the image of a national coffee and a familiar taste.

While traditional brands of ‘Finnishcoffee’continue todominate the Finnish market (see Box 6 on page 40) itwill be hard for certified coffees to ever be more than aniche market. This is recognised by Paulig which saysthat it is not afraid of the new certified coffees since

they do not compete with conventional coffees with aFinnish taste. Paulig also says that it cannot usecertified coffee for these traditional brands as there isnot enough certified coffee to secure regular suppliesof the constituent types of coffee that make up itsspecial blends. Furthermore, since their coffees arebought from many different and changing sources itis difficult to have this constantly changinginformation on the package. The traceability ethos ofcertification does not sit well with the constantlychanging and secretive approach of blending.

Similarly in Portugal, the taste of Fairtrade coffeebeing mostly arabica (ie more aromatic and withless caffeine) differs from the taste that consumersare accustomed to. There is a strong traditionalcultural habit to drink coffee in cafés rather than athome and this has influenced Portuguese taste incoffee. Major roaster companies offer coffeemachine equipment to restaurants and bars, againinfluencing the choice of coffee.

QualityFairtrade has suffered from a perception of lowquality, partly fuelled by the emphasis on ‘helpingpoor farmers in developing countries’ and perhapsby the reality in the initial years. But a number ofFairtrade coffee products on the Danish markethave won Cup of Excellence awards (see footnote179 on page 48) in recent years. In addition,Fairtrade coffee came out on top in small-scaleblind-tastings in Finland run by KirkonUlkomaanapu (Finnish Church Mission Help). Thissuggests that there is a difference between realityand perception. Max Havelaar in Denmark is nowworking to convey a new type of message of proudproducers and a good quality product,moving away from the ‘help’connotations of previous messages.

Consumer information Lack of consumer knowledge aboutcertification and lack of visibility areconsidered to be important barriers forthe expansion of the certified coffee market. InDenmark, key players in the retail chain think thatthe Max Havelaar certification is too difficult for theaverage consumer to understand and that there is aneed to provide further information. Retailers feelthat only a small number of people want to helpdeveloping countries by paying more for aFairtrade coffee – not helped by a recent change inthe logo of Max Havelaar, which itselfacknowledges that consumer information could beimproved. The Max Havelaar Foundation is now

Consumer choosing a Fairtrade coffee at a retail outlet

From bean to cup

44

working on a promotion initiative to display a rangeof different Fairtrade products together insupermarkets to convey the fair trade message in amore powerful way. It is also putting more emphasison traceability which is at the heart of the fair tradesystem and demonstrating to the consumer the linkbetween the product they are buying and thecertified producer group.160

The entry of new certified labels on these markets,and the very recent initiatives of mainstreamcompanies to sell Fairtrade or Rainforest Alliancecoffee may compound these problems of consumerinformation. In the US, where a multiplicity ofcertification schemes emerged early on, there wereinitial fears of consumer confusion, as expressed byGiovannucci’s 2001 survey of sustainable coffee whichwarned that: ‘failure to promote or educate aboutstandardised terminology will very likely lead to thedeterioration of terms such as “Shade coffee” untilthey are as meaningless to a consumer as the word“natural”.’161 This survey also showed that there was alack of clarity within the coffee industry itself as towhat each of the sustainable coffees represents,probably contributing to consumer confusion.

Four years on, it appears that these fears have notmaterialised. According to Rodney North from EqualExchange, the terms organic and Fairtrade are morestrongly established than before and more widelyrecognised but ‘shade coffee’ still suffers from lowunderstanding among the public. There is alsoimproved knowledge within the specialty industrywhere the large majority knows the meaning of theterms organic, Fairtrade and shade. This appliesparticularly to the importers and roasters who areclosest to the producers, and less so to the retailers.162

Until very recently, there were practically only twocertification schemes for coffee in Denmark, MaxHavelaar and the organic certification controlled bythe Danish authorities. This helped to keep matterssimple for consumers, but as discussed previously,there were still problems of insufficient consumerknowledge. This has changed, as from October 2005Kraft Foods Nordic started marketing severalRainforest Alliance labelled coffees in the Danishmarket (but not in Finland because of the difficultiesof meeting Finnish taste requirements). Utz Kapehhas also signalled its intention to sell certified coffees

in Denmark. It is too soon to be able to observe theimpact of these various developments.

Kraft believes that because of its position in themarket, the high quality of the coffee it imports andthe type of certification involved (ie more holisticthan the single issue organic or Fairtradecertification), it can reach the mainstream market andnot the current niche of Fairtrade. It acknowledgesthe challenge of explaining complex certification toconsumers but believes that it has the capacity anddetermination to do so.163

The Max Havelaar Foundation believes that entry ofKraft and other big players into certification need notbe a problem if handled well and could result in anexpansion of the market for certified sustainablecoffee, but there are dangers of increasing consumerconfusion.164 A particular concern of Max Havelaar isthat small marginalised producers may lose outbecause most of the new certified products comingonto the Danish market are from larger producers.For example, the Fairtrade label provides benefits toproducers in the form of the floor price, not providedby other schemes. If consumers think that theschemes are all the same, then Fairtrade producerswill lose out as consumers interested in sustainabilitywill pick the cheapest certified product.165 This meansthat consumers will need to understand what thedifferent labels stand for.166

In Finland, the most well known certified coffee isFairtrade, in particular that sold by the FinnishProtestant Church, but according to a range of keyinformants (consumer journalists, the informationofficer at the Fair Trade Foundation and a retailer)there is a low level of knowledge and considerableconsumer confusion. Even the professionals do notalways know the difference between the brands andthe certifications. Events such as the Fair Trade weekin October 2005 was helped by increasing mediacoverage of fair trade in newspapers, magazines, andon television and radio. The impact that an extensiveadvertising campaign can have on coffeeconsumption is demonstrated by the case of Meiraand its top product Kulta Katriina which was re-launched in spring 2005. After several weeks ofconsumer and trade paper advertising, the retailmarket share of Kulta Katriina rose from 14% to 21%nationwide.167

160 Judith Kyst, personal communication, 2005161 Giovannucci, D, 2001162 Rodney North, personal communication, 2005163 Bors Brito Westelius, personal communication, 2005 164 Judith Kyst, personal communication, 2005

165 Judith Kyst, personal communication, 2005166 Judith Kyst, personal communication, 2005167 http://www.segafredo.it/eng/news-e_online.html , viewed on12/1/06

Linking up producers and consumers

45

Visibility in retail outletsA key problem is visibility on the supermarketshelves and in retailer promotions. This can only beaddressed with extra resources. It is commonknowledge that there are substantial costs involvedin ‘buying’ shelf space in the supermarket chains asretailers need to be assured that the products will selland that sales targets per unit of shelf space will beachieved or that promotions will have the desiredeffect. Suppliers are often asked to makecontributions to cover the costs of the promotionaloffer.168 ‘Our challenge is to fight for the shelf metres,’says Judith Kyst, Chief of Marketing, Max HavelaarFoundation, Denmark.

In Denmark, sustainable coffee as a product group isstill too small to attract large-scale marketing attentionfrom roasters and retailers, but this may change if itsvolume achieves a critical mass in the market placeand as more retail chains adopt ‘green’ policies. Thereare signs of greater interest from the retail sector andit is significant that the Board of Max HavelaarFoundation now includes Mads Krage, the formerCEO of Netto, the Danish discount retail chain.

The other major development in these threemarkets which may lead to consumer confusion isthe entry of the major roasting companies intoFairtrade as discussed previously. Procter andGamble and Sara Lee are both marketing Fairtradecoffee in the US. In Finland, the Swedish companyArvid Nordqvist has recently launched a Fairtradecoffee, ‘Classic Reko,’ at the very competitive priceof 7 euros per kilo. It has made a Finnish blend tomeet Finnish taste demands.

The Max Havelaar Foundation in Denmarkwelcomes the efforts of the multinational roasters totake some responsibility for how coffee is producedbut does have some concerns. Ultimately, however,what matters is whether small producers can sellmore certified coffee as a result of thesedevelopments. The Foundation believes that it is theresponsibility of the labelling organisations tocommunicate to consumers about the differencebetween labelling a product and labelling a companyand that it is now strong enough to be able to dothis, in contrast to the previous five years.169

Language and communicationThis factor applies mainly to Finland but implieslessons for countries that have similar languageconstraints. The Finnish language is not an Indo-European language and thus does not belong to theSlavic, Germanic or Latin language families, anddoes not resemble most common Europeanlanguages. This creates particular challenges formarketing in Finland and for communicatingcomplex concepts like sustainability.

168 Dobson, PW, 2003 169 Judith Kyst, personal communication, 2005

Certified coffees on retailer’s shelves

From bean to cup

46

This section presents some case studies of certifiedcoffee commodity chains in order to show the linksbetween impacts at the local level in Brazil and theconsumers who buy the certified coffee in Denmark,Finland and the US.

These case studies are illustrations and cannot betaken as representative of all certified coffee chains.They serve to demonstrate the diversity of situationsin which certified coffee makes its way from theproducer to the final consumer and the range ofdrivers which bring about these tradingrelationships.

The chains have been selected with the aim ofproviding a link between the producer countries andconsumer countries in the study, across differenttypes of certification schemes. Given the difficultiesinvolved in tracing the source of coffee, the ease ofidentifying the various links in the chain has alsoinfluenced our choice.

Three chains are presented below:

• Cooperativa dos Agricultores Familiares de PoçoFundo, a co-operative association of small familyfarmers, certified under the Fairtrade scheme,exporting to US and Denmark.

• The Fazenda Santa Terezinha, a small-mediumcertified organic coffee grower employing hiredlabour, exporting to Finland via the UK.

• Ipanema, the world’s largest coffee estate,certified under Utz Kapeh and RainforestAlliance, exporting to Denmark and the US.

For each chain we have obtained information oneach of the major links in the chain to understand thenature of the chain and how it has been influencedby certification. We also aim to present the views of

170 Luis. Adauto Oliveira, personal communication, 2005

Chapter 6

Linking up producersand consumers

those involved along the chain on how certificationhas affected them or their business, and on barriersand opportunities for expansion of the market forcertified coffee.

A number of key observations can be made:

• There are diverse drivers leading to certification.Buyer interest is clearly important but linkinginterested buyers with certified producers in oneof these cases required personal contacts andappears to be driven more by philanthropy thanexpectations of direct business benefits.

• The role that quality plays in facilitating the saleof certified coffee, whether Fairtrade, organic orother scheme.

• The uneven acceptance of certification, as thechains show a trader who does not like ‘causecoffees’ but still buys organic coffee, and buyerswho pay a premium for certified coffee but do notplace a certification label on the package.

• The varied range of benefits of certification alongthe chain. While the premiums are important forthe growers, particularly for the small andmedium growers, there are other less tangiblebenefits, such as improved market access, longer-term contractual arrangements, reduction in riskand more transparency in negotiations.


47

Case study 1 – Fairtrade co-operative – small family farms

The growers170

The Cooperativa dos Agricultores Familiares dePoço Fundo (Poço Fundo Assocation of SmallProducers) is a co-operative located in themunicipality of the same name in the south of MinasGerais. The association was established in 1991 withthe aim of improving living standards for farmersthrough organisation and co-operation. One of therequirements for becoming a member is that 80% ofthe family income must come from the land. In 1997it began the process of Fairtrade and organiccertification with Max Havelaar in the Netherlandsand the Associação de Agricultura Orgânica in 1997.In 2002 it was certified Fairtrade with FLO/MaxHavelaar and organic with the Instituto Biodinámico.

The association has around 170 members of which136 are certified as organic. Other members are in theprocess of transition to organic. The associationproduced about 2,000 bags of coffee in 2004, 3,600bags in 2005 and is expecting to produce 6,000 bagsin 2006, all arabica of high quality. Most of the coffeeproduced is exported, mainly to the US and Japanbut also to Denmark. The association is now able tosell all of its coffee at the Fairtrade price. ThePresident of the association believes this is because ofits high quality.

Certification under the Fairtrade system costs 500euros per year and is paid by the association.Organic certification is paid by the individualproducer and costs US$ 60 per producer per year.Under the rules of the Fairtrade system a proportionof the revenues must be channelled into projects forthe benefit of the community, US$ 7 per bag forFairtrade and US$ 19 per bag for double certifiedFairtrade and organic. The association has decided toaverage this contribution out and charge eachproducer US$ 13 per bag regardless of whether theyare organic certified. The aim is to create an incentiveto producers to convert to organic.

In the first two years the association used thismoney to set up a coffee warehouse and processingfacilities for the coffee. It then moved to projects ofa more social nature such as a computer trainingfacility for all member families as well asdisadvantaged members of the local community,and provision of dental treatment. In the next stage,the plan is to use the money to make improvements

in the members’ properties such as concreting overthe drying yards.

These decisions were made by members in theperiodic assemblies where each family has one vote,exercised by the (usually male) head of household.As from 2006, there will be an additional vote perfamily to allow women to play an equal role in thegovernance of the co-operative. This is particularlyimportant as women work alongside men in thecoffee farms. This move to give women greater saywill set Poço Fundo apart from other Fairtradecertified co-operatives where women have typicallyplayed only a minor role in governance.171

Poço Fundo association has clearly benefited fromFairtrade certification which started for them asworld coffee prices reached historic low levels. Theprocessing facility (which is far too costly for thefarmers to buy on an individual basis) has meantthat the farmers are no longer at the mercy of theintermediary going from farm to farm to take theircoffee to processing. The processing facility is usedby all the members of the co-operative and they onlyhave to contribute a small amount to cover theenergy cost. As the facility is controlled by the co-operative, there are no longer disagreementsabout the volume delivered, as was the case inprevious years when private millers were used. As aresult of the higher prices received, the producershave been able to install concrete terraces for dryingbeans, make improvements to their houses and/orbuy vehicles. The elimination of agro-chemical usemeans a safer environment for their children as thereis no risk of them chewing on coffee cherries sprayedwith fertilisers, etc.

One of the families in the association, the Rezendefamily, where ten brothers each have small plots ofcoffee, two of which are organic, have been able tobuy a tractor and trailer to transport the coffee toreplace the ox cart that they used previously. Inaddition, they have installed septic tanks for theirhouses. As a result of the Fairtrade requirements,their children are only starting to work at the age of16 and continue to attend school in the evenings.

No producer in the association uses chemicalpesticides – this is a requirement of membership(presumably to prevent contamination of the existingorganic producers’ coffee). The organic productiontechniques used by the association were developedand researched by the producers themselves,

171 Taylor, PL, 2002

From bean to cup

48

drawing on local knowledge of farming practices ofprevious generations and facilitated by links withlocal research institutes and companies producingorganic fertilisers. They use a mixture of cow dung,coffee husks and an oleaginous plant (mamona).

After the conversion to organic, the association thenencountered a marketing problem, as at that time(1999/2000) the Brazilian market was not aware of thedifferences between organic and conventional coffee.Although other organic products were on the marketin Brazil, organic as a concept was not common.Before certification the Association sold their coffee toa national company (Cooxupe). Fairtrade certificationopened up the potential of export sales.

The Association has looked into the possibility ofRainforest Alliance certification but believes that theaudit fee of US$ 4,000 per year is too high in relationto the expected price premium to make it viable.

The trader172

Coffee produced by the Cooperativa dosAgricultores Familiares de Poço Fundo is exportedby Exprinsul, a large coffee exporter. It startedexporting Fairtrade coffee in 2003 with 1,280 bagsand by 2004 had expanded to 11,300 bags drawnfrom four Fairtrade co-operatives (Poço Fundo,FACI, Santana and Novo Rezende). The Fairtradecoffee is exported to US, Canada, Spain,Netherlands, UK and Germany. Nevertheless, thisrepresents only a tiny proportion of the company’stotal coffee exports. While the Poço Fundoassociation now does its own milling, two of theother Fairtrade co-operatives send their coffee beansto Exprinsul to be milled there. As a result theproportion of the export price that goes to theproducing co-operatives varies from 93% to 95%.

The motive for taking on this role of Fairtrade coffeeexporter appear to be primarily philanthropical, adesire to help the small coffee producers. Animportant factor was the good links between thePresident of Exprinsul and a roasting and importingcompany, Blazer Wolthers in the US, which arrangedthe sale of the first shipment in 2003 to Dunkin’Donuts.173 When the first shipment was made CleberMarques de Paiva, the President of the company, wasquoted as saying: ‘It is an honour for Exprinsul to berecognised worldwide as the company which ismanaging to make Fairtrade sales viable in Brazil. Tobe known as a company which practices fair trade is

our greatest reward, as well as forming part ofsocial responsibility initiatives, since we do notmake any financial profit on this operation.’174

Two years on, Flúvio Henrique Selvati, theMarketing Director of Exprinsul, believes that theexport of Fairtrade coffee has benefited thecompany by increasing its visibility and creatingtrust and may well have contributed to increasingsales. Some clients who first got to know thecompany through purchase of Fairtrade coffee arenow also buying conventional coffee from Exprinsulas well. Dealing with Fairtrade and double certifiedfair trade/organic coffee has required someadjustments to keep these coffees separate fromconventional coffees but this has had minimal costimplications. The company intends to continueexporting Fairtrade coffee and is preparing toexport Utz Kapeh certified coffee in the future. It islisted as a new registered buyer in the Utz Kapehnewsletter in November 2005.

The importer175

Blazer Wolthers imports Utz Kapeh and Fairtradecoffee to the US, European and Japanese markets.The company is owned by Christian B Woltherswho is also Chairman of the Utz Kapeh Board. In2000, the company’s sales of certified coffeesrepresented 5-6% of sales. This proportion has risenin five years to as much as 50%. Certification is inline with the business vision of the company andthe desire for better trading practices andrelationships within the sector of sustainablecertified coffees.

However, there are other advantages in that dealingin certified coffee is less speculative. ChristianWolthers believes that certification is likely tobecome increasingly important in the context offood security and food safety in both the US andJapanese markets given the bans on certainchemicals in food and concerns about bio-terrorism.Certified coffee schemes have traceability schemesin place that meet existing and future legalrequirements in both countries. This may help toexpand the market for certified coffee.

The coffee from Poço Fundo is sold to Dunkin’Donuts for use in the chain’s espresso blends undera 24-month contract. It is roasted by three differentcompanies on a contract basis for Dunkin’ Donuts.In this case, the interest in Fairtrade coffee has been

172 All material in this section comes from Flúvio Henrique Selvati,Exprinsul, except where otherwise stated173 Gazeta Mercantil, 2003

174 Ibid.175 Christian B Wolthers, personal communication, except whereotherwise stated.


49

buyer-driven. In 2002, Dunkin’ Donuts approachedBlazer and Wolthers for help in sourcing Fairtradecoffee for their espresso coffees. Since Braziliancoffee was the main constituent in the chain’sespresso (blend), Dunkin’ Donuts was keen to findFairtrade Brazilian coffee with similar characteristicsto maintain consistency of taste.

At the time none of the three producer groups thatwere FLO-FT certified in Brazil had the exportcapacity that was needed to supply Dunkin’ Donuts.Wolthers already had a working relationship withExprinsul, so he asked this company to help himidentify which one would be the best group toengage in this initiative. This is how Poço Fundocame into the picture. They were FLO certified andproducing arabica coffee. Wolthers had to providethe association with technical assistance – includingfinancial investments so that they could matchDunkin’ Donuts standards.

According to Christian Wolthers, both BlazerWolthers and Exprinsul have limited profit marginsfrom the Fairtrade coffee trading and most of theprofits are kept by the producers. However, there arebenefits involved in handling Fairtrade coffee asnegotiations are quite transparent, there is nospeculation involved and the level of risks involvedis lower. He says this provides a contrast to thecannibalistic nature of the conventional market.

The retailer Dunkin’ Donuts, part of the Allied Domecq group,is the number one retailer of coffee by the cup in theUS, selling 2.7 million cups a day – nearly one billioncups a year. It is the largest coffee and baked goodschain in the world with 6,100 shops in 30 countriesworldwide. Despite its name, coffee is the majorproduct of Dunkin’ Donuts, making up 63% of thecompany’s US$ 4.4 billion annual revenue.176

Since 2003, the coffee beans used for Dunkin’ Donutsespresso beverages, including cappuccino and latte,have been certified through Transfair USA.Purchases of Fairtrade certified coffee representapproximately US$ 1.5 million in income.177 This is asmall proportion of the total coffee purchases ofDunkin’ Donuts, which in 2003 estimated thatFairtrade purchases would come to 2% of the chain’stotal coffee purchases.178

Case study 2 – The medium-sizeorganic farm

The growerThe Fazenda Santa Teresinha, which is located inMinas Gerais near Varginha, combines dairy cattleand pig farming with coffee growing. It has a coffeeproduction area of 25 hectares, producing about 700bags of coffee per year (42 tonnes) and a permanentlabour force of 24 with an extra 15 workers at harvest time.

Paulo Sérgio de Almeida, the owner of the farm, hasbeen using organic production techniques for over 20 years, avoiding chemical pesticides and makinguse of the manure produced by the livestock to makeorganic fertiliser for the coffee. In 2000, he obtainedorganic certification status with the BrazilianInstituto Biodinámico, following this in 2001 withorganic certification under an international system.The farm is now certified to meet IFOAM, JAS(Japan) and the US Department of Agriculturestandards. In 2001, the coffee from this farm won theCup of Excellence award.179 This broughtconsiderable publicity to the farm and facilitatedcontacts with buyers. The coffee is exported to theUK, US and Japan. The UK importer, Mercanta, re-exports it to Finland where it is used by thecompany, Mokkamestarit.

Organic certification has worked out well in thiscase. The certification coupled with the prestige ofwinning the Cup of Excellence award has attractedthe interest of a range of buyers. Paulo Sérgio deAlmeida estimates that he can obtain prices for hiscoffee that are US$ 40-50 higher than other organiccoffees in the area and US$ 80-100 higher than forconventional coffee. He stresses that the high qualityof his coffee, as demonstrated by the Cup ofExcellence award, has a significant influence on theprice and the range of markets that he can access. Asthe farm was already employing organic techniquesthere were no costs involved in changing practices.There are costs involved in certifying under threedifferent organic systems but these are compensatedby the sales generated and market access secured.The adoption of organic techniques and theapplication for certification were achieved withoutany external government or NGO support.

176 Rodrick, S, 2005177 Dunkin’ Donuts, 13/10/05178 Dunkin’ Donuts, 25/4/05179 The Cup of Excellence is a competition that selects the verybest coffee produced in that country for that particular year.Winning coffees are chosen by a select group of national and

international cuppers and are tasted at least five different timesduring the competition process. Only coffees that receive a scoreof 80 or above are allowed to move forward. The winners areawarded the prestigious Cup of Excellence® and sold to thehighest bidder during an internet auction. For more details seewww.cupofexcellence.org.

From bean to cup

50

Almeida believes that the price premium will bemaintained in his case and not eroded but stressesthat this is because of the high quality of his coffee.He intends to stay with organic certification anddoes not envisage applying for Rainforest Alliance orUtz Kapeh because of the demanding social andenvironmental requirements.

The trader180

Mercanta is a specialist coffee importer, founded in1996, with the aim of supplying fine coffees tospecialty coffee roasters. It sells coffee to roasters in14 countries. It buys and imports green coffeedirectly from the Santa Terezinha farm, stores it in itsspecialty warehouse facility in London and re-exports it to a specialty coffee roaster companiesworldwide, including Mokkamestarit in Tampere,Finland.

The company’s main emphasis is on quality, so itspriority is to buy coffees which carry a certificationto demonstrate quality as well as responsible socialand environmental practice. It considers that thecertifications of the Brazil Specialty CoffeeAssociation (BSCA) and Costa Rica Specialty CoffeeAssociation (SCACR) certification meets its needs inthis respect. The BSCA has developed a set ofstandards for social and environmental managementsystems for coffee which address issues such as childlabour, forced labour and freedom of association aswell as a range of environmental requirementsrelating to soil and water conservation, permanentpreservation and legal reserve areas, bio-diversity,ecosystem, forest and endangered species.181

But Mercanta is critical of what it terms ‘causecoffees’ (Fairtrade, Utz Kapeh, Rainforest Allianceand Bird Friendly) and states that it has chosen notto carry these coffees because it believes that cupquality should come first. Its motivation for buyingthe coffee from Santa Terezinha was primarily itshigh quality rather than its organic status. Itacknowledges though that there is a steady butgrowing demand for organic certified coffees andone of Mercanta’s customers buys only organic.There are several buyers in the UK and elsewherewaiting for the Santa Terezinha coffee before it iseven picked and if Mercanta could import more ofthis coffee it would be able to sell it. It stresses thatthere is a lot of work involved in importing organiccoffee and if it were not for the high quality of theSanta Terezinha coffee they would not import.

By 2007, Mercanta aims to have full traceability of itscoffee – in other words direct and personalrelationships with all the growers it buys from. Itintends to expand its import of coffee certified underschemes like those of the BSCA and SCACR. ‘We willcontinue to support those farmers who produceexceptional coffee and who manage their workersand land fairly and responsibly. But we will not buy“badges” such as Fairtrade in an effort todemonstrate our credentials’.

Case study 3 – The large UtzKapeh and Rainforest Alliancecertified estate

The grower182

Ipanema is claimed to be one of the largest coffeegrowers in the world with 4,000 hectares plantedwith coffee on its three farms, producing 120,000bags (7,200 tonnes) of green coffee per year (natural,fully washed and semi-washed). It is a verticallyintegrated company, involved not only in coffeegrowing but also trading on the international anddomestic market and roasting, describing itself as a‘seed to cup solution provider’. Some 15-20% of itsproduction is for the domestic market. It also hassome cafés under the name Cafeera in São Paulo city.

The company is owned by Cia Bozano, also engagedin the aeronautical and real estate sector, and TriluxParticipaçoes which is active in sugar cane. IpanemaCoffees was set up in 1970 and moved into export in1991. It has a permanent management, commercialand agriculture staff of around 770 and employs afurther 2,000 in the harvest season.

The company moved into specialty coffees at thebeginning of the 1990s as a way of differentiatingitself from other producers. A few years later as othercompanies moved into specialty coffees, there was aneed again for differentiation. Ipanema sawadvantages in certification as this provided a way toprove to the market that it was producing coffeesustainably and was therefore different from othercompanies. It was already close to meeting therequirements of certification (for Utz Kapeh) and hada number of social projects with its workers and thelocal community.

Ipanema was the first coffee estate in Brazil to becertified under the Utz Kapeh system in 2002. This

180 Grant Rattray, Account Manager, Mercanta, personalcommunication, 2005

181BSCA, 2005182Washington Luis Rodrigues, CEO Ipanema, interview, 25/10/05

Conclusions and recommendations

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was because it was involved from the outset of theprocess to adapt the EurepGAP standards (a series ofsector specific farm certification standards created byretailers and their suppliers to demonstrate goodEuropean agricultural practices). EurepGAP and theUtz Kapeh Foundation worked in collaboration toadapt the code for fruit and vegetables to coffee.

In 2004, some 30,000 bags (1,800 tonnes) of coffeewere sold as Utz Kapeh certified. The company hasalso become certified under the Rainforest Alliancescheme and is the world’s largest supplier ofRainforest Alliance certified coffee at 5,000 bags (300tonnes) in 2004. It considers the codes for these twoschemes to be very similar but the requirements ofthe latter are more complex. In order to comply withthe Rainforest Alliance scheme, Ipanema is restoringthe original ecosystem to areas of land that weredeforested over 300 years ago. This requiresconsiderable investment.

Ipanema feels that what the company receives inmoney from certification does not compensate all theeffort involved. The advantages of certification forIpanema have been the facilitation of market accessand the opportunity to reach large buyers tonegotiate long-term contracts. For example, throughits involvement in Utz Kapeh, Ipanema has secured afixed price contract with the Norwegian companyFriele until 2011. The Rainforest Alliance scheme hasbeen less helpful in this regard but Ipanema hasdecided to go for this certification because it isimportant in the US market. Some of the buyers ofIpanema’s certified coffee, Friele for example, andsome buyers in the US do not put the certificationlabel on the package even though they are paying apremium for it. According to Ipanema, this is becausebuyers need to be sure of the system before makingthe commitment to put the certification logo on thepackaging.

Ipanema’s focus at present is on establishing long-term relationships with buyers and maintaining andimproving quality. About 30% of its coffee iscurrently sold under long-term contracts. It has along-term contract with Starbucks until 2011 whichalso involves a fixed price. It is this agreement whichhas enabled Ipanema to re-introduce the bourbon

variety which is sought after by Starbucks because ofits sweet flavour. This variety was common in Brazilin the 1950s but was gradually replaced by higheryielding varieties. Starbucks is also contributingaround US$ 3 per bag to Ipanema’s social projects.

As certification becomes more widespread, Ipanemais searching for new ways to differentiate itself. Forthis reason it is developing traceability systems. Eachpack of coffee will have a code number and bothbuyers and consumers will be able to find out fromthe website where the coffee corresponding to thatnumber has come from. According to WashingtonLuis Rodrigues, the CEO of Ipanema, the challengeis to educate the consumer and make clearer whateveryone along the chain is doing.

The buyer/trader and roaster183

Estate Coffees started in 1996 with a mission toprovide a new angle on coffee for the consumer bytreating it like wine and emphasising differentiationby taste and origin and roast (light, medium anddark). The company set out to buy the best coffeesfrom each producing country. It is important for thecompany to buy directly from the farmer or co-operative in order to get the right quality coffee.Estate Coffees buys about 3,000 bags per year (180tonnes) of which about 40 tonnes are from Ipanemaand two other farms in the South Minas region.

Estate Coffees has been buying from Ipanema fromthe outset, partly because it was aware that thecompany had good social conditions and some socialprojects. The first criterion is taste (ie quality) andwhere that can be achieved, certification is a pluspoint and another source of differentiation. Now thatIpanema is certified with Utz Kapeh, Estate Coffeesis paying a premium but is not placing the label onthe coffee packages, as there is currently insufficientconsumer recognition and knowledge of this label inDenmark where Fairtrade and organic have moremeaning for consumers. The sales of certified coffeeare growing for Estate Coffees but primarily becauseit is able to combine the certification with high-quality coffee. In this case it appears that it was thereputation of the company rather than thecertification that interested this buyer.

183 Søren Sylvest, Director, Estate Coffees, Denmark, interview25/10/05

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There has been an explosion of interest in sustainablecoffee and in improving the contribution of coffee tosustainable development. There are now fivecertification schemes in place for coffee as well as anumber of industry/multi-stakeholder initiatives todevelop standards for sustainable and/orresponsible coffee production. The consumer is animportant driver in these developments, ascertification schemes will fail if they do not attractconsumer interest and support. It is thereforeimportant to provide evidence for consumers thattheir choices can make a difference.

While certification schemes are growing rapidly inthe coffee sector, they still represent only a smallproportion of coffee production. Moreover, there aresigns that certified production capacity exceedsdemand, particularly for Fairtrade and organic.Certified sustainable coffee is still perceived as beinga niche product. For this reason, approaches such asthe Utz Kapeh and the Rainforest Alliancecertification schemes that aim to target themainstream buyers of coffee are of interest as a wayof raising standards across the board.

It is too early to judge whether they will be able tofulfil this promise. Some people such as NestorOsorio, Executive Director of the International CoffeeOrganization, sees the future of certified coffee asremaining within the specialty niche. However, healso argues that the niche certified markets may besmall in volume but they are large in terms ofpolitical awareness. They send a message to the bigplayers in the coffee sector that they need to be moreresponsible.

Impact of certification on coffeegrowers

Brazil

Evidence of the impacts of coffee certification aroundthe world is mixed but generally positive in terms ofproducer benefits for Fairtrade (although forrelatively small numbers of producers as supplyexceeds demand) and more mixed for othercertifications depending on the location and thepractices of growers before certification. Somegrowers, eg in El Salvador, have been disappointedby low sales and low premiums.184

Our evidence from the Brazil survey is broadlyconsistent with this picture worldwide. Revenues forcertified coffee growers have generally increased as aresult of certification and access to export marketshas been facilitated. This is particularly striking forthe Faitrade certified growers. The evidence from thePoço Fundo association, one of the six co-operativesof small coffee farmers which are certified Fairtrade,is that achieving this certification has made a markedimprovement to their living conditions.

Organic producers have also benefited but are seeingthe differential with conventional coffee diminish ascoffee prices increase. For some organic producersthe price premium does not compensate for theadditional costs of production in terms of reducedyield. Premiums have also declined for the UtzKapeh scheme, but here it appears that market accessand the ability to negotiate long-term contracts aremore important as benefits of certification.

Certification of coffee is relatively recent in Braziland has mostly been adopted in a period of low butincreasing coffee prices. There are already signs thatfor organic producers the financial advantages ofcertification and the differential from conventionalcoffee are diminished when coffee prices are higher.It is also widely believed that premiums (outside of

Chapter 7


184 Pagiola, S and Ruthenberg, M, 2002


53

the Fairtrade scheme) will be affected as the supplyof certified coffee increases. Nevertheless, there areother benefits of certification, such as the ability toenter into more direct contact with buyers andnegotiate long-term contracts.

Impacts on farm/estate workers andcommunitiesThere is evidence also that it is not just the coffeefarmers who are benefiting but the estate workers andlocal communities. Large companies are takingmeasures to meet the social requirements ofcertification schemes. While some observers point outthat companies are simply meeting the requirementsof the law, enforcement is lax in Brazil so additionalincentives to meet legal requirements are useful.

Impact on local environment There are also important environmental benefitsassociated with all four types of certification,particularly in relation to reduced or better manageduse of agro-chemicals, and in the case of theRainforest Alliance certification, the restoration ofnative vegetation. In order to meet the requirementsof certification, certified coffee farmers haveimproved the treatment and recycling of water usedfor the processing of coffee. This appears to haveinfluenced the environmental awareness andperformance of neighbouring coffee farmers.

Barriers to certificationIn Brazil, certification has so far mainly been takenup by large and medium coffee growers. Thisunderlines the important contribution of theFairtrade certification system as it targetssmallholder co-operatives. How much furtherFairtrade can expand depends heavily on consumerdemand. It is notable that compared to the othercertification schemes, Fairtrade has proceeded quiteslowly in Brazil.

Utz Kapeh is now the most extensive coffeecertification scheme in Brazil. It is therefore importantthat the Utz Kapeh scheme and the Rainforest Allianceschemes are seeking ways to work more with smallproducers and that some producer groups are in theprocess of certifying with Utz Kapeh. It is too early tojudge whether producer groups of smallholderfarmers can benefit from Utz Kapeh certification to thesame extent as for Fairtrade.

Whatever the certification scheme, maintaining andimproving the quality of coffee is vital to securingaccess to new markets.

Vietnam

The enormous growth of Vietnam’s coffeeproduction has been achieved at significant cost tothe environment. As coffee is mainly a smallholdercrop, largely grown by poor people and ethnicminorities, the fluctuation in world prices has beendevastating in its social impact. Certification has thepotential to make an improvement.

Evidence from Vietnam is very limited becausecertification is so new and so far only one scheme,Utz Kapeh, has any presence. Moreover, only state-owned companies have been certified. Thesecompanies have incurred costs primarily in meetingthe social requirements of Utz Kapeh. While thesecosts exceed the price premiums, the companiesconcerned appear to be committed to certificationand considerable expansion is expected of Utz Kapehin Vietnam.

For smallholder farmers, other types of certificationsuch as organic and Fairtrade are likely to be moreappropriate. But for either to make any headway,improvements in quality and environmental practiceare needed and changes in producer organisation.Smallholder co-operatives could play an importantrole in Vietnam in promoting better environmentalpractices in coffee production and ensuring a higherreturn for the growers.

Impact on consumer markets

Demand for certified coffee There is variation in the level and growth of demandfor certified coffee by country and by certificationscheme. Fairtrade is stagnant in Denmark butexpanding rapidly in US and Finland. It is not clearyet whether the emergence of new coffee certificationschemes such as Utz Kapeh will expand the marketor lead to increased competition for more establishedschemes such as Fairtrade and organic. Much willdepend on how the schemes and their unique char-acteristics are communicated to consumers.

Certified coffee appears relatively expensive becauseof the use of conventional coffee in some countries(Denmark and Finland) as loss leaders withsubstantial discounts. This is a significant barrier toexpansion of certified coffee.

Where discounts are not used, it is difficult forconsumers to compare prices on a rational basis

From bean to cup

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because so little information is given on the originsand quality of the mainstream coffee brands. There isso much variation in the price of coffee, dependingon the brand and the outlet.

Adoption of certified coffee by the mainstream coffeeroasters appears to be a positive development thatmay result in an expansion of demand. Neverthelessthe dominant approach is to add a new certifiedbrand to the portfolio of brands to attract a differentgroup of customers. There is little indication that themainstream coffee roasters intend to use certifiedcoffee on any major scale in their established brands.

Where markets and countries have markedpreferences for a particular coffee taste, as in Finlandand to a lesser extent Denmark, this represents abarrier for certified coffee.

VisibilityThere are concerns about the low visibility ofcertified coffees in the countries examined in thisstudy, particularly for Fairtrade coffee in Portugal.This is an acute problem as certified coffee is notavailable in mainstream retail outlets.

Consumer confusionThere are concerns about the effects on consumers ofmultiple certification schemes as more schemesbecome established, eg Utz Kapeh and RainforestAlliance in markets such as Denmark whereFairtrade has dominated the certified niche.However, similar fears raised in the US several yearsago have proved unfounded, and knowledge aboutcertification among consumers and the industry hasgenerally increased.

Prospects for demandEfforts to expand demand need to be market-specific totake account of cultural differences between countries.

Certified coffee commodity chains

It has been beyond the scope of this study to providemore than illustrations of the links in the commoditychain between producers of certified green coffeeand the consumers who buy the final product inDenmark, Finland and the US. From ourexamination of three chains we have observed thefollowing:

• There are diverse drivers leading to certificationsuch as personal contacts and philanthropy,

although buyer interest is clearly the mostimportant.

• The important role that quality plays infacilitating the sale of certified coffee, whetherFairtrade, organic or any other scheme.

• The uneven acceptance of certification, as thechains show a trader who does not like ‘causecoffees’ but still buys organic coffee and buyerswho pay a premium for certified coffee but do notplace a certification label on the package.

• The varied range of benefits of certification alongthe chain. While the premiums are important forthe growers, particularly for the small andmedium growers, there are other less tangiblebenefits along the chain such as improved marketaccess, longer-term contractual arrangements,reduction in risk and more transparency innegotiations.

Recommendations

Consumer organisationsConsumer organisations should work to upholdconsumer rights to a healthy environment, toeducation and to information in appropriate andunderstandable languages. They can help to expanddemand for certified coffee by:

• Explaining to consumers about the differencesbetween coffee certification schemes and therationale for price differentials between differenttypes, qualities and brands of coffee.

• Lobbying mainstream roasting and retailers tomake a more substantial commitment to certifiedcoffee, for example making certification arequirement for all own label coffee.

Consumer country governments

Governments in consumer countries need to revisitrequirements on companies to make informationavailable to consumers. At present, consumers arenot given enough information about the quality andorigins of conventional coffee to compare prices ofcertified and conventional coffee on a rational basis.

Institutional buyers of coffee in the public andprivate sector (local governments, hospitals, large


55

companies, etc) can lead the way by buying certifiedcoffee for use by staff, customers, patients etc, toraise awareness and make such coffee more visiblefor consumers.

Certification organisations

Certification organisations on the demand side of themarket need to:

• Improve the visibility of certified coffee andprovide more information on how the variouscertification schemes differ. This is important forUtz Kapeh and Rainforest Alliance, which targetroasters and retailers rather than individualconsumers, with the result that their logo is notalways present on the coffee package. If theirultimate goal is consumer acceptance, theyshould also be making efforts to communicatedirectly to consumers.

• Promote certified coffee through buyers’networks (if necessary creating a separateorganisation for this purpose to avoid conflicts ofinterest) and adopting strategies which takeaccount of national cultural conditions of thecoffee market, eg in Finland, a ‘Paula Girl‘ topromote sustainable certified coffees.

On the supply side of the market, at the producerlevel, certification organisations need to:

• Streamline their application and evaluationrequirements so that multiple certifications (iefrom more than one scheme) can be obtained atlower cost.

• Step up their efforts to promote groupcertification and find ways of reducingcertification costs for small producers.

Such efforts to promote access should not involve arelaxing of the standards required for certification,otherwise these certification schemes will lose theireffectiveness in raising the economic, social andenvironmental standards of coffee production andtrading.

Coffee importers and roastersassociation/specialty coffee associationsThese organisations can play a role in promotinggreater traceability and transparency. They can alsoprovide information to consumers to help themunderstand the differences in prices betweenconventional and certified coffee of different types.

RetailersRetailers can support certified coffees by:• Improving the visibility and expanding their

range of sustainable certified coffees.

• Including in the company’s policy a significantcommitment to increase their supply ofsustainable certified coffee, for example bymaking it a requirement for all own label coffee.

Donor agenciesDonor agencies can take action on both the supplyside and demand side of the market. On the supplyside they can support measures to reduce barriers tosmall-scale producers entering certification, and topromote the formation of coffee producerassociations and groups. On the demand side,donors can support establishment of certified coffeebuyer networks and activities to promote demandfor certified coffee.

Further research needs

Developments in certification change rapidly suchthat the short-term impacts of certification may bearlittle relation to the long-term outcomes. It istherefore necessary to track the longer-term impactsof certification as initiatives become moreestablished. Given the phenomenal growth of theUtz Kapeh scheme and the fears about its effects onother certification schemes, it will be particularlyimportant to evaluate its impact. Such impactassessment needs to examine in depth the economic,environmental and social impacts of certification toenable a comparative analysis of sustainability ofeach scheme.

The other development that is important to track isthe move by the mainstream companies into certifiedcoffee. How will this affect consumer perceptionsand buying habits? Will it have the effect ofexpanding the market for certified coffees or will ittake business away from the existing specialistFairtrade and certified suppliers?

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Personal communicationsRenato Farhat Brito, Executive Director, SeteCachoeiras, interview 14/10/05

Paulo Sérgio de Almeida, owner of Fazenda SantaTeresinha, telephone interview, November 2005

Ivan Caixeta, ex-President of ACOB, interviewAugust 2005

Ann Hedman, Product Chief, Finnish Fair Trade,interview 11/8/05

Judith Kyst, Marketing Director, Max HavelaarFoundation, Denmark, interview 25/10/05

Rodney North, Equal Exchange, e-mail 5/11/05

Luis Adauto Oliveira, President, Cooperativa dosAgricultores Familiares de Poço Fundo (COOPFAM),interview 13/10/05

Nestor Osorio, Executive Director, InternationalCoffee Organization, interview 19/10/05

Luis Guedes Pinto, Director, Imaflora, presentation14/10/05

Grant Rattray, Account Management, Mercanta TheCoffee Hunters, e-mail 18/11/05

Washington Luis Rodrigues, CEO, Ipanema Coffees,interview 12/10/05

David Rosenberg, Director, Utz Kapeh, telephoneinterview 14/11/05 and e-mail 27/11/05

E Sampaio, Utz Kapeh, interview, August 2005

Flúvio Henrique Selvati, Marketing Director,Exprinsul, telephone interview, November 2005

Paula Suutarinen, Tuko Logistics, Findland,telephone interview 10/8/05

Søren Sylvest, Director, Estate Coffees, Denmark,interview 25/10/05

Sabrina Vigilante, Rainforest Alliance, e-mail 14/11/05

Mogens Werge, Director of Environment, COOP-Denmark, interview with Torsten Raagaard, summer 2005

Börs Brita Westelius, Manager, ExternalCommunications, Nordic, Kraft Foods, interviewwith Torsten Raagaard, summer 2005

Chris Wille, Rainforest Alliance, e-mail 10/11/05

Christian B Wolthers, owner, Blazer Wolthers,interview 17/11/05

PublicationsBaffes, J, Lewin, B, and Varangis, P (2005) ‘Coffee:Market Setting and Policies’ in Ataman Aksoy, Mand Beghin, JC (eds), Global Agricultural Trade andDeveloping Countries, The World Bank, Washington DC

Bass, S, Thornber, K, Markopoulos, M, Roberts, S andGrieg-Gran, M (2001) Certification’s impacts on forests,stakeholders and supply chains, Instruments forSustainable Private Sector Forestry series,International Institute for Environment andDevelopment, London

Bliska, F and Pereira, S (2005) O Que Há por Trás doPreço do Café Resultados da pesquisa realizada junto aprodutores, compradors, exportadores e torrefações noBrasil, Centro de Café Alcides Carvalho InstitutoAgronômico Secretaria de Agricultura eAbastecimento do Estado do São Paulo, Brazil

BCSA – Associação Brasileira de CafésEspeciais/Brazil Specialty Coffee Association (2005)Specialty Coffee Social Environmental ManagementSystems, 1/2/05; available at:http://www.bsca.com.br/dloads.php?lang=en

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Talbot, JM (2002) ‘Information, Finance and the NewInternational Inequality: The Case of Coffee’, Journalof World-Systems Research, VIII, 2, Spring, p214-250

Taylor, PL (2002) Poverty alleviation throughparticipation in Fair Trade coffee networks: synthesis ofcase study research question findings, Colorado StateUniversity, Fort Collins

Thomaziello, RA et al (2000) ‘Café Arabica: Cultura eTécnicas de Produção’, Instituto Agronómico,Boletim Técnico 187, p82

TransFair USA, Fast Facts; available at:http://www.transfairusa.org/pdfs/fastfacts_coffee.pdf

UNCTAD (1994) The Environmental Effects ofAgricultural Production, and Related Measures:Illustrative cases from developing countries, report bythe UNCTAD secretariat, UNCTAD/COM/42

UNCTAD/IISD(2003) Sustainability in the CoffeeSector: Exploring Opportunities for InternationalCooperation: available at: www.iisd.org/pdf/2003/sci_coffee_background.pdf

Utz Kapeh (2005) Annual Report 2004

Utz Kapeh, Newsletter November 2005

VINASTAS and VICOFA - Vietnam Standards andConsumer Association and Vietnam Coffee andCocoa Association (2005) What is behind the coffeeprice?

Young, CEF (2002) Is deforestation a solution for economicgrowth in rural areas? Evidence from the Brazilian MataAltlantica, University of Oxford, Centre for BrazilianStudies, Working paper CBS-36-2002

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Consumers International 24 Highbury CrescentLondon N5 1RX, UKTel: + 44 20 7226 6663, fax:+ 44 20 7354 0607Website: www.consumersinternational.orgContact: [email protected]

International Institute for Environment andDevelopment (IIED)3 Endsleigh StreetLondon WC1H 0DDTel + 44 20 7388 2117, fax +44 20 7388-2826Website: www.iied.org Contact : Maryanne Grieg-Gran, e-mail: [email protected]

IIED is an independent, non-profit research instituteworking in the field of sustainable development. TheSustainable Markets Group drives IIED’s efforts toensure that markets contribute to positive social,environmental and economic outcomes and bringstogether IIED’s work on business and sustainabledevelopment, ernvironmental economics, agrifoodmarkets, and trade and investment.

Consumers International (CI) defends the rights ofall consumers, particularly the poor andmarginalised, through empowering nationalconsumer groups and campaigning at theinternational level. CI represents 234 organisations in 113 countries.

Research organisationsBrazilCentro de Café ‘Alcides Carvalho’Instituto AgronómicoSecretaria de Agricultura e Abastecimento do Estadode São Paulo Caixa Postal 2813001-970 Campinas (SP)Tel: +55 19 3241 5188 ext. 370/393/366, fax: +55 19 3212 0458http://www.iac.sp.gov.br

Centro de Café 'Alcides Carvalho' is linked toInstituto Agronômico (IAC) research institute, whichwas established in 1887 to provide technicalassistance to the coffee industry. Today IAC is part ofthe Paulista agency of agribusiness technology,which carries out scientific research and technologytransfer to support coffee production, allied to socio-economic and environmental development.

VietnamVietnam Coffee and Cocoa Association (VICOFA)5 Ong Ich Khiem StreetBa Dinh District, HanoiTel: +84 4 733 6520 / 845 28187, fax : +84 4 7337498E-mail :[email protected] : http://www.vicofa.org.vn

VICOFA was established in 1990 and promotes co-operation with organisations that work on coffee andrelated enterprises in Vietnam and abroad. Itcurrently has over 100 members representingnational corporations, companies, research centres,institutes, groups and individuals engaged inproduction, processing, trade, export supply service,scientific and technological research and training inthe coffee and cocoa industries throughout Vietnam.

Annex 1

Participating organisations

Consumer organisations

BrazilInstituto Brasileiro de Defesa do Consumidor (IDEC)Rua Dr. Costa Junior, 356 Agua BrancaSao Paulo - SP - CEP 05002-000Tel: +55 11 3874 2150, fax +55 11 3862 9844Website: www.idec.org.brContact : Lisa Gunn, e-mail: [email protected]

DenmarkForbrugerrådet (FBR) – Danish Consumer CouncilFiolstræde 17Postbox 2188DK-1017 Copenhagen KTel: +45 77 41 77 94, fax: +45 77 41 77 42Website: www.fbr.dk www.taenk.dkContact: Torsten Raagaard, e-mail: [email protected]

FinlandKuluttajat-Konsumenterna ry Kasöörinkatu 38Helsinki, 00520Tel :+358 9 8775 0120, fax:+358 9 8775 0120Website: www.kuluttajat-konsumenterna.fi/Contact: Johanna Parikka Altenstedt, e-mail: [email protected]

PortugalAssociaçáo Portuguesa Para a defensa DoConsumidor (DECO) Rua da Artilharia Um, 79 - 4º1269-160 Lisbon Tel: +351 21 371 02 40, fax : +351 21 371 02 99 Website: www.deco.proteste.ptContact: Maria de Fátima Ferreira, e-mail: [email protected]

United StatesConsumers Union of US Inc101 Truman AvenueYonkers, NY 10703 Tel: +1 914 378-2754, fax: +1 914 378-2928 Website: www.consumersunion.orgContact: Kristi Wiedemann,e-mail: [email protected]

VietnamVietnam Standards and Consumers Association(VINASTAS)214/22 Ton That Tung StreetDong Da District, HanoiTel: +84 4 852 0981, fax: +84 4 852 7769Contact : Do Gia Phan, e-mail: [email protected]

is a 20-minute documentary to accompany this report. It looks at the maintypes of sustainable certified coffees and assesses the benefits for coffeeproducers and consumers.

Just Coffee follows the certified coffee chain from the farms of Brazil to the supermarket shelves of consumer countries. Itincludes exclusive interviews with certified coffee farmers,roasters, consumer representatives and some of the majorplayers in the international coffee sector.

Just Coffee is a compelling introduction to coffee certificationand provides an ideal educational tool for anyone interested insustainability, fair trade and social responsibility.

For a DVD please e-mail: [email protected]

The DVD is free to NGOs and academic institutions and $US 5 to others.

Just Coffee: how consumer choice impacts on coffee producers and the environment

Consumers International 24 Highbury Crescent London N5 1RX, UKTel: +44 20 7226 6663Fax: +44 20 7354 0607e-mail: [email protected]

Documents

From bean to cup - Consumers International